FX.co ★ EUR/USD

The EUR/USD pair finds itself under intense downward pressure, slipping to the 1.1355 region during early Asian trading on Thursday, June 25, 2026. This decline marks the Euro’s weakest performance against the U.S. Dollar since June 2025, a testament to the diverging paths of the world’s two largest economies. Investors are increasingly abandoning the common currency as market sentiment shifts decisively in favor of the Greenback, driven by heightened expectations that the Federal Reserve will resume its tightening cycle later this year. The catalyst for this sentiment is the inaugural policy meeting led by new Fed Chair Kevin Warsh, whose hawkish rhetoric and focus on price stability have effectively dismantled the market’s previous reliance on near-term monetary easing. The contrast in central bank conviction has become the dominant narrative in currency markets. While the Federal Reserve is actively signaling that interest rate hikes remain firmly on the table to combat inflation—which has been exacerbated by energy costs—the European Central Bank (ECB) is navigating a much more precarious environment. Although the ECB delivered a 25-basis-point rate hike earlier this month, the move was widely viewed as a reactive necessity in response to an energy shock, rather than a sign of economic health. As geopolitical tensions between the U.S. and Iran show early signs of easing, global oil prices have begun to stabilize; ironically, this cooling of the "war premium" has reinforced expectations that the ECB may be forced to turn more dovish, further undermining the Euro’s appeal.

Market positioning is now aggressively aligned with the "U.S. exceptionalism" trade. According to the CME FedWatch tool, the probability of a 25-basis-point hike in July has surged to 34.2%, up from a mere 8.5% just a week ago, while the odds of a move in September have similarly climbed to 66.4%. As Eugene Epstein of Moneycorp recently noted, the current strength of the Dollar is rooted in the "hawkishness" of Fed expectations, which are reaching levels of conviction not seen in recent memory. Today’s focus is squarely on the U.S. May Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge. Analysts expect the headline PCE to climb to 4.1% year-on-year, up from 3.8% in April, while core PCE inflation—excluding volatile food and energy components—is projected to rise to 3.4%. A print that meets or exceeds these elevated forecasts would likely solidify the case for a September hike, providing further fuel for the Dollar’s ascent. As the Euro remains pinned to the defensive, any potential for a recovery appears increasingly limited, with technical support levels crumbling under the weight of a fundamental backdrop that favors a persistent, rate-driven rally in the Greenback for the remainder of the quarter.