empty
13.06.2025 12:20 AM
The Dollar Flees the Battlefield

The old becomes new again. The word "recession" again trended in the Forex and other financial markets. May's U.S. Consumer Price Index (CPI) fell short of Bloomberg analysts' forecasts. Following that, the Producer Price Index (PPI) also disappointed. And it doesn't stop there. Continuing jobless claims rose to their highest levels since 2021.

When inflation is stable or decelerating, and the labor market shows signs of stagnation, the Federal Reserve must consider cutting the federal funds rate. This is positive news for EUR/USD bulls, who have successfully pushed the main currency pair above 1.16 for the first time in nearly four years.

Even the guilty are feeling the pressure. The White House was the first to sound the alarm. Donald Trump again called on the Fed to cut rates by one percentage point, while Vice President J.D. Vance labeled the central bank's passivity as negligent behavior. Yet the very uncertainty of the U.S. administration's policies has delivered the biggest blow to the American economy.

Fed Rate Expectations in the Futures Market

This image is no longer relevant

This time, the futures market agrees with the White House. Following the U.S. inflation data, the odds of a rate cut in September jumped from 70% to nearly 80%. The probability of three rate cuts in 2025 is soaring, while the chance of only one is declining. A grim outlook for EUR/USD bears.

On the other hand, euro bulls are encouraged by comments from European Central Bank Governing Council members. Christine Lagarde stated that the ECB is comfortable with the current level of interest rates and has enough flexibility if the situation suddenly worsens. Isabel Schnabel noted that core inflation is expected to grow by 1.9% this year and next, indicating that prices remain under the central bank's control. With inflation under control, the monetary easing cycle has likely ended.

ECB Forecasts on Economy and Inflation

This image is no longer relevant

The euro gains a clear advantage when one central bank stays on the sidelines for a long time and the other prepares to act by cutting rates. Few expected the European economy to hold up well—it's export-oriented, and trade wars were seen as a potential trigger for a deep recession. In reality, the situation was not as dire as anticipated.

This image is no longer relevant

By contrast, the U.S., which had previously shown economic growth near 3%, has deeply disappointed in 2025. GDP contracted by 0.2% in Q1, and if the trend continues, the U.S. could officially enter a technical recession in Q2. A weak economy = weak currency. The U.S. dollar proves this once again.

Technical Outlook: On the daily EUR/USD chart, a breakout above the upper boundary of the fair value range, followed by a successful breach of a key pivot level, allowing for long entries from 1.1445 and additions from 1.1490. The first target at 1.1600 has already been reached. Traders should use pullbacks as opportunities to build long positions toward 1.2000.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

What to Pay Attention to on July 4? A Breakdown of Fundamental Events for Beginners

No macroeconomic reports are scheduled for Friday. As previously mentioned, today is a public holiday in the United States, known as Independence Day. All banks and stock exchanges will

Paolo Greco 07:59 2025-07-04 UTC+2

GBP/USD Overview – July 4: Reeves Cried — Did the Pound Collapse?

The GBP/USD currency pair also traded fairly calmly throughout Thursday until the start of the U.S. trading session. Recall that a day earlier, the British currency had plummeted by nearly

Paolo Greco 03:56 2025-07-04 UTC+2

EUR/USD Overview – July 4: Trump's Third Trade Deal Didn't Help the Dollar Either

The EUR/USD currency pair traded very calmly throughout Thursday, until unemployment and labor market reports were released in the United States. However, we will discuss those reports in other articles

Paolo Greco 03:56 2025-07-04 UTC+2

US-Japan Trade Talks at an Impasse, BoJ Holds Off

The Bank of Japan's quarterly Tankan report showed that the impact of new US tariffs has not yet had a significant effect on corporate sentiment, and business conditions for large

Kuvat Raharjo 00:48 2025-07-04 UTC+2

EUR/USD. What Do the June Nonfarm Payrolls Tell Us?

The U.S. labor market report published on Thursday turned out to be quite contradictory, although the market interpreted it in favor of the American currency. Looking ahead, it is worth

Irina Manzenko 00:48 2025-07-04 UTC+2

The Dollar Sent the Fed on Vacation

The labor market report confirmed the prevailing narrative in the market: trade in a way that benefits Donald Trump. In 2023–2024, discussions of American exceptionalism led to a rise

Marek Petkovich 00:48 2025-07-04 UTC+2

USD/JPY. Analysis and Forecast

The USD/JPY pair remains under pressure despite the U.S. dollar posting moderate gains for a second consecutive day, approaching the 144.00 level. Improved global risk sentiment following the trade agreement

Irina Yanina 15:01 2025-07-03 UTC+2

XAU/USD. Analysis and Forecast

Gold prices are struggling to gain momentum after a moderate intraday rebound from the $3340 level. Traders remain cautious, preferring to await the release of the U.S. Nonfarm Payrolls (NFP)

Irina Yanina 12:21 2025-07-03 UTC+2

EUR/JPY. Analysis and Forecast

consecutive day, once again approaching the yearly high reached earlier this week.The trade agreement between the United States and Vietnam has eased concerns over a prolonged trade conflict, increasing investor

Irina Yanina 12:13 2025-07-03 UTC+2

Good News Will Support Stock Markets and Token Demand (Potential Upside for Bitcoin and #NDX)

The market has ignored extremely weak employment data from ADP, focusing its attention on other factors. The ADP report released on Wednesday showed a significant slowdown in the U.S. private

Pati Gani 10:40 2025-07-03 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.