EUR/USD - Both Central Banks Turned Less Hawkish, But the Dollar Stays Stronger

EUR/USD trades around 1.1429 today, near the lower end of its 2026 range. The story this week is not about one currency getting weaker. Both sides softened their outlook for rate hikes at the same time.

Start with the US. Last week's jobs report showed only 57,000 new jobs, far below expectations. Fewer jobs mean less reason for the Fed to raise rates. That should have pushed the dollar down and helped the euro.

But Europe softened too. Eurozone inflation cooled to 2.8% in June, below forecasts and down from 3.2% in May. At a conference in Sintra, ECB President Christine Lagarde said the risks to inflation and growth had eased. Traders responded by cutting bets on a second ECB rate hike this year.

So both central banks became less likely to raise rates. When that happens to both sides at once, the currency pair often does not move much from that alone. What decides the direction here is simpler: US government bonds still pay a much higher interest rate than European ones. That gap keeps pulling money toward the dollar, even when US rate-hike bets fade.

Fed meeting minutes come out on Wednesday. If they show policymakers still leaning toward a hike later this year, the dollar can extend its edge. If they sound more cautious, the euro has room to recover.

EUR/USD key levels: 

• Resistance: 1.1470, then 1.1525 
• Support: 1.1370, then 1.1325

Watching: Wednesday's Fed minutes, the US-European bond yield gap, any follow-up comments from Lagarde.

By Born2trade market research department

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