European currencies, particularly EUR/USD and EUR/JPY, are showing strong gains amid a notable weakening of the US dollar. Pressure on the greenback intensified following the release of a series of disappointing macroeconomic indicators. In May, the core Consumer Price Index (CPI) rose by just 0.1% — well below expectations — while the headline CPI came in at 2.4% versus a forecast of 2.5%.

An additional factor was the slowdown in producer-level inflation (PPI): the monthly figure was 0.1% against the expected 0.3%, and the annual core PPI slowed to 2.7% compared to the projected 3.0%. These figures suggest a decline in inflationary pressure in the US and have fuelled speculation about a potential interest rate cut by the Federal Reserve.

In addition to the data, the dollar also reacted to growing geopolitical risks following trade-related comments by Donald Trump, who announced new tariffs targeting key US trade partners. Investors are concerned that such unilateral measures may lead to a slowdown in international trade and increased fiscal pressure.

EUR/USD

The EUR/USD pair has climbed above the 1.1600 mark, reaching a new high for the year from the previous low of 1.0570. This rally has been driven by a combination of factors: soft US inflation data, reduced expectations for Fed rate hikes, and a broader reassessment of dollar prospects. The euro’s resilience is also being supported by stabilising economic sentiment in the eurozone and a more cautious tone from the European Central Bank (ECB).

Technical analysis of EUR/USD points to a possible pullback towards recent highs in the 1.1500–1.1480 area. However, a continuation of the bullish momentum from current levels cannot be ruled out.

Key upcoming data releases that may impact EUR/USD include:

• 09:00 (GMT+3): Germany – Consumer Price Index (CPI)
• 10:00 (GMT+3): Spain – Harmonised Index of Consumer Prices (HICP)
• 12:00 (GMT+3): Eurozone – Trade Balance
• 17:00 (GMT+3): US – University of Michigan Inflation Expectations

EUR/JPY

The EUR/JPY pair is also on the rise, reaching the 167.70 level. The euro continues to receive support against the yen due to the relative resilience of the eurozone economy, contrasted with soft inflation data in the US and the Bank of Japan’s ongoing ultra-loose monetary policy. In the near term, the euro may retain its upward momentum if macroeconomic data continue to point to a slowing US economy and fading inflationary pressures.

Technical analysis of EUR/JPY suggests a potential corrective pullback following the recent strong rally. The next area where the pair may resume its upward movement lies around 165.00–164.70.

Additional events that could influence EUR/JPY pricing include:

• 07:30 (GMT+3): Japan – Industrial Production
• 07:30 (GMT+3): Japan – Services PMI
• 18:00 (GMT+3): Speech by ECB Executive Board Member Frank Elderson

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