The euro is under pressure as soft eurozone data, global trade tensions, and rising geopolitical risks weigh on sentiment. With the European Central Bank expected to hold steady, the euro-dollar pair remains in the spotlight for traders watching for signs of a clear direction.

Euro weakens as eurozone PMI data disappoints

The euro edged lower to around $1.1486 on Monday after new economic data from the euro area came in below expectations.

The composite Purchasing Managers’ Index (PMI) for June held steady at 50.2, just above the contraction threshold but below the anticipated 50.5 forecast by economists surveyed by The Wall Street Journal.

This underwhelming figure signals ongoing weakness in the eurozone economy and highlights the challenges facing the region’s recovery efforts.

Sluggish growth in the services sector, where elevated input costs remain a concern, continues to weigh on overall momentum.

While inflationary pressures are still present, analysts such as Cyrus de la Rubia of Hamburg Commercial Bank suggest that the current outlook does not yet justify a more aggressive policy shift by the European Central Bank (ECB).

The eurozone’s economic rebound remains fragile, and the ECB is likely to tread cautiously as it weighs up the need to support growth while managing inflation expectations.

Global risks and trade tensions add pressure on the euro

Beyond soft domestic data, external factors are also contributing to the euro’s recent weakness.

Shifting global trade policies, particularly the continued impact of US tariffs introduced during the Trump administration, are expected to place more strain on Europe’s export-driven economy than on the United States.

With global demand cooling, the eurozone’s vulnerability to external shocks is becoming more evident, strengthening the ECB’s dovish position and limiting the euro’s upward potential.

Meanwhile, growing geopolitical tensions—especially the ongoing conflict between Israel and Iran—have intensified risk aversion in financial markets.

This has prompted investors to seek safety in the US dollar, further undermining the euro.

Rising oil prices, fuelled by instability in the Middle East, present another obstacle for the eurozone, which remains highly dependent on energy imports.

As energy-driven inflation risks resurface, the ECB must strike a careful balance between controlling prices and supporting sluggish domestic demand.

For now, a policy shift appears unlikely, and this cautious stance is likely to continue weighing on the euro.

Market analysis: EUR/USD momentum fades near resistance

In the currency markets, the EUR/USD pair briefly dipped to an intraday low of 1.14508 before rebounding toward the 1.14900 mark.

However, the recent upward move appears to be losing steam, with the pair encountering resistance near 1.15200.

This level has attracted renewed selling interest, suggesting that bullish momentum may be stalling.

Picture: Euro pares losses after dipping below 1.1460, as seen on the VT Markets app.

Technical indicators point to a neutral setup. The MACD has flattened out near the zero line, while short-term moving averages are converging—both signs that momentum is levelling off after the corrective bounce.

Without a decisive break above 1.15200, the pair is likely to enter a period of sideways consolidation.

Key levels remain in focus as traders assess the broader macroeconomic environment. Support around 1.14500 continues to hold, while resistance is capped at 1.15440, the recent local high.

With growth indicators soft and inflation trends stabilising, market participants expect the ECB to maintain its current stance.

As a result, the euro may continue to drift within its current range, barring any major shocks.

That said, further deterioration in eurozone data or escalating global trade risks could shift the balance toward additional euro downside, with 1.1450 once again acting as a critical support zone.

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