Title: EUR/USD Extends Decline, Drops to One-Month Low as US Economic Data and Fed Comments Weigh Heavily
Original Author: Mihael Milev, TradingPedia
Date Published: July 29, 2025
Source: TradingPedia (https://www.tradingpedia.com/2025/07/29/eur-usd-extends-losses-plummets-to-1-month-low/)
The EUR/USD currency pair continued its downward trend on Tuesday, July 29, 2025, falling to its weakest level in a month. The decline came amidst strong US economic data and hawkish remarks from Federal Reserve officials that reignited hopes for sustained policy tightening. A stronger US dollar and diverging monetary policy expectations between the European Central Bank (ECB) and the Federal Reserve put significant pressure on the euro.
Market Overview: Euro Under Pressure
The euro came under notable selling pressure in early European trading on Tuesday. The EUR/USD pair dropped to as low as 1.0825, its lowest level since late June. This marks the third consecutive daily drop for the pair as the dollar gains traction across the board.
Main Drivers of EUR/USD Weakness
Several factors contributed to the recent decline in the EUR/USD pair. Investors are increasingly leaning toward the US dollar amid the following developments:
• Stronger-than-expected US economic data
• Hawkish comments from Federal Reserve officials
• Weakening eurozone inflation expectations and data
• Differing interest rate outlooks between the Fed and ECB
US Economic Data Strengthens Dollar
Recent US data releases provided support to the greenback and reinforced market expectations that the Federal Reserve might maintain higher interest rates over an extended period.
• The latest readings on US gross domestic product (GDP) beat analyst expectations, showing robust economic growth in Q2 2025. GDP expanded at a 2.6 percent annual rate, exceeding the projected 2.2 percent. The report indicated healthy consumer spending and business investment.
• Durable goods orders in the US also surprised to the upside, rising 1.2 percent in June versus forecasts of 0.6 percent. This suggests ongoing strength in manufacturing and demand for capital goods.
• US consumer confidence rose unexpectedly in July, with the Conference Board’s index climbing to 118.0 from June’s revised 116.3. This is the highest level in nearly two years, indicating continued optimism among American consumers.
Fed Officials Signal Caution, Favor Prolonged Tight Policy
Comments from key Fed officials added further support to the US dollar. Several members of the Federal Open Market Committee (FOMC) dismissed the idea of imminent rate cuts and stressed the need for caution in declaring victory over inflation.
• Chicago Fed President Austan Goolsbee stated that inflation remains elevated in key sectors and that more evidence is needed before considering any policy loosening.
• Fed Governor Michelle Bowman reiterated that the central bank should maintain a restrictive stance until inflation convincingly approaches the 2 percent target.
• San Francisco Fed President Mary Daly emphasized the importance of remaining data-dependent and warned that declaring the end of the tightening cycle prematurely could risk a resurgence in price pressures.
These statements contributed to a firmer dollar as market participants adjusted their expectations for future rate moves. The CME FedWatch Tool indicates that markets now see a roughly 40 percent chance of another rate hike by the end of 2025.
Eurozone: Dovish Expectations Build for ECB
In contrast to the monetary stance of the Fed, the European Central Bank is viewed as nearing or having already reached the peak of its rate hiking cycle. Recent data from the eurozone signals a marked slowdown in growth and inflation dynamics.
• Eurozone inflation eased to 2.4 percent in June 2025, in line with the ECB’s target but also raising concerns about potential disinflation.
• Core inflation, which excludes volatile food and energy prices, fell to 2
Read more on EUR/USD trading.