Euro Soars to Near Three-Year High as PPI Data and Trump’s Tariffs Sink US Dollar

The Euro surged against the US Dollar for the second consecutive day, nearing a three-year high, as a confluence of disappointing US economic data and President Trump’s renewed tariff threats sent the Greenback reeling. The EUR/USD pair advanced over 0.70%, trading around 1.1575 after briefly breaking past 1.1600.

The catalyst for the Dollar’s decline was the latest US Producer Price Index (PPI) report for May, which, like the Consumer Price Index (CPI) earlier in the week, underscored a persistent disinflationary trend. Both headline and core PPI figures rose by a modest 0.1% month-over-month, falling short of expectations and reinforcing the narrative of subdued inflationary pressures. Further compounding the Dollar’s woes, fresh jobs data revealed an increase in unemployment benefit claims, pointing to a cooling labor market.

Adding fuel to the “Sell America” trade, President Donald Trump escalated trade tensions by announcing plans to impose unilateral tariffs on several countries ahead of a July 9 deadline. This unexpected move rattled financial markets and prompted a flight towards higher-yielding currencies, further weakening the US Dollar.

Meanwhile, the Euro found robust support from hawkish remarks by several European Central Bank (ECB) officials. Notably, ECB’s Isabel Schnabel signaled that the monetary policy easing cycle is nearing its end, asserting that financial conditions are no longer restrictive. While other ECB members like Villeroy, Patsalides, and Simkus offered nuanced perspectives on budget deficits and interest rates, the overall sentiment leaned towards a less accommodative stance, bolstering the Euro’s appeal despite expectations of slowing industrial production and upcoming inflation data for Germany and France.

Looking ahead, the EUR/USD pair appears poised to consolidate within the 1.1500-1.1600 range in the near term. The technical outlook remains bullish, with the pair establishing a clear uptrend marked by successive higher highs and higher lows, supported by a strong Relative Strength Index (RSI). A sustained breach above 1.1600 could open the door for a challenge of the 1.1650 and even 1.1700 levels. However, a slip below 1.1550 might trigger a pullback towards 1.1500, with further downside potential if that level is breached. Market participants will be closely watching Eurozone inflation reports and the US University of Michigan Consumer Sentiment index on Friday for further directional cues.