EUR/USD falls near 1.11500 during afternoon trading in North America on Friday. The major currency pair weakens as the US Dollar (USD) gains strength, bouncing back from earlier losses after the release of important economic data for the United States. The US Dollar Index (DXY), which monitors the value of the US currency against six major currencies, rises above 101.00.
Flash data for May shows that one-year consumer inflation expectations have risen to 7.3%, up from the previous release of 6.5%. This could deter the Federal Reserve (Fed) from decreasing interest rates from their current levels, as some Fed officials have argued that existing tariff rates are high enough to drive inflation. On Monday, the US and China agreed to reduce tariffs by 15% for a period of 90 days.
Earlier this week, Chicago Fed Bank President Austan Goolsbee stated, “Tariffs are still three to five times higher than they were before, so they will have a stagflationary effect on the economy. They will slow growth and push prices up.” According to the CME FedWatch tool, there is a 91.8% probability that the Fed will maintain interest rates between 4.25% and 4.50% in the June meeting, and a 65.1% probability for the July meeting.
Meanwhile, the Consumer Sentiment Index (CSI) surprisingly decreased to 50.8 in May, down from 52.2 in April – the lowest level since June 2022. Economists initially predicted an increase to 53.4. This marks the fifth consecutive month of declining sentiment data.
EUR/USD falls close to 1.1150 as uncertainty looms for the pair. The short-term outlook remains unclear as the 20-day Exponential Moving Average (EMA) is serving as a significant obstacle around 1.1210. The 14-period Relative Strength Index (RSI) shows indecision among traders as it rebounds strongly to 50.00 after dropping near 40.00.
Looking ahead, the major resistance for the pair will be the April 28 high of 1.1425, while the March 18 high of 1.0955 will act as a crucial support for Euro bulls.