Euro strengthens above 1.1550 as Fed rate hike bets fade

The EUR/USD pair gathers strength to around 1.1575 during the early Asian trading hours on Monday. The US Dollar (USD) edges lower against the Euro (EUR) amid weaker-than-expected US economic data and shifting central bank expectations. Traders will take more cues from the speech of the European Central Bank (ECB) President Christine Lagarde on Wednesday. 

Retail Sales in the United States (US) fell by 0.6% MoM in July, compared to a rise of 0.2% in June, the US Census Bureau showed on Friday. This figure came in below the market consensus of a 0.1% growth. On an annual basis, Retail Sales rose 5.0% in July versus 6.8% (revised from 6.7%). 

Traders reduce their bets on the US Federal Reserve (Fed) rate hikes following a slew of softer US data, including Consumer Price Index (CPI), Producer Price Index (PPI) and Retail Sales. This, in turn, weighs on the Greenback and acts as a tailwind for the major pair. 

Markets are now pricing a 33.1% chance of a rate hike next month, down from 44% last week, according to the CME FedWatch tool. However, market participants remain convinced the US central bank will need to raise rates by the end of 2026 to bring down inflation that has been running above the 2% target for more than five years.

Ongoing Middle East tensions, particularly concerning energy supply routes, could boost a safe-haven currency such as the USD against the EUR. Iran’s Deputy Foreign Minister Kazem Gharibabadi called on the US to “accept the reality of defeat and stop indulging in delusions” after US President Donald Trump suggested that he would soon declare the Strait of Hormuz a “territory of the United States.”

On Friday, Iran’s Foreign Minister Abbas Araghchi said that there were “no negotiations currently taking place between Tehran and Washington.”

Eurozone data steady as GDP meets forecasts and trade swings back to surplus

Strategists at Scotiabank highlight that the second Eurozone Q2 GDP release was "in line with expectations, printing 0.4% Q/Q to deliver a 1.0% Y/Y pace of growth." They add that the external sector has also turned more supportive, with the region’s trade position improving as "the trade balance returned to a surplus in June, ending a short-lived deficit that emerged from March to May."

Technical Analysis: EUR/USD maintains a constructive outlook above the 100-day SMA

In the daily chart, EUR/USD holds above the 100-day simple moving average (SMA) and the Bollinger Bands’ middle line, keeping the near-term bias constructive while it grinds higher within the upper half of the recent range. The Relative Strength Index (14) at 63 suggests firm upward momentum, though the spot remains capped by the upper Bollinger band resistance.

On the topside, immediate resistance is defined by the Bollinger Bands’ upper boundary at 1.1635, where buyers may hesitate to extend the advance. On the downside, initial support is located at the 100-day SMA at 1.1570, followed by the Bollinger middle band near 1.1490 and the lower band around 1.1345, levels that should cushion any corrective pullbacks while the broader bullish structure persists.