- The euro remains modestly upwards against the US dollar on Friday, in the midst of a weaker dollar and a calmer risk tone.
- The caution posture of US President Trump about the Israel-Iran conflict reduces the fears of an immediate escalation, weighing on the safe refuge flows.
- The EUR/USD remains close to 1,1510, slightly below the maximum intradication of 1,1535, while the DXY rides below 99.00.
The euro (EUR) advances modestly against the US dollar (USD) on Friday, capitalizing a weaker dollar while operators digest a cautious geopolitical signal of the White House. The plan of US President Donald Trump to decide in two weeks about the possible participation of the US in the Israel-Iran air conflict has calmed the immediate fears of a rapid military action, slightly increasing the appetite for the risk.
The EUR/USD pair remains about 1,1510 in a side market on Friday, retreating slightly from the maximum of the 1,1535 session. At the same time, the American dollar index (DXY) is still under moderate pressure, retreating below the level of 99.00 to quote about 98.75, with the feeling content while the markets remain on alert for the possible participation of the US in the Israel-Iran conflict.
The manufacturing index of the Fed of Philadelphia remained stable in -4.0 in June 2025, without changes compared to May and below the market expectations of a more moderate fall to -1. Reading emphasizes that manufacturing activity in the region remains slow, affected by weak demand and the first cooling signs in labor market conditions.
The ongoing conflict in the Middle East continues to stir global markets, promoting the prices of crude upward oil and generating concerns about new inflationary pressures in the Eurozone. Notably, the general inflation of the Eurozone fell to 1.9% in May from 2.2% in April, marking its first decrease below the 2% objective of the ECB in several months.
The European Central Bank (ECB) cut its key interest rate for the eighth time earlier this week and pointed out that it is approaching at the end of its flexibility cycle. Speaking in Italy, the Governing Council member of the ECB, François Villeroy of Galhau, said that, except for an external shock – including any new military escalation in the Middle East – monetary policy could continue to incline towards accommodation in the next six months. He also stressed that the recent strength of the euro against the US dollar should help cushion part of the inflationary impact of high oil prices.
In the American Front, the Federal Reserve (FED) maintained its reference interest rate without changes in 4.25% –4.50% per fourth consecutive meeting earlier this week, keeping its approach to wait and see while policy managers evaluate the persistent inflationary risks against the signs of moderation in the economic impulse. Recent data showed that general inflation rose slightly to 2.4% in May from 2.3% in April, while underlying inflation remained stable about 2.8%, even above the Fed comfort zone.
Although the markets still expect the Fed to make two rate cuts this year, President Jerome Powell warned that the new cost pressures for tariffs or renewed tensions in the Middle East could complicate the path to flexibility. Despite this divergence of policies, the euro remains in a favorable position for now, backed by the current uncertainties on tariffs.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
