Published on: 2026-07-27
Updated on: 2026-07-27
The near-term EUR/USD forecast comes down to two events: what the Federal Reserve signals at its 29 July meeting, and the growth and inflation data released the day after.
EUR/USD recovered to about 1.1406 on 27 July as Brent crude fell, US Treasury yields eased and the dollar softened together, a mix that flatters the euro without proving it strong.
Whether the pair holds near 1.14 or slips from here depends on the Fed’s tone and the numbers that test it, and the bond market will show the answer first.
EUR/USD trades near 1.1406 as the US Dollar Index eases towards 101.19.
Brent crude has fallen more than 6% to around $92 a barrel, easing the near-term inflation impulse.
Markets price roughly a one-in-three chance that the Fed raises rates on 29 July.
US second-quarter GDP and June PCE inflation both land on 30 July, a day after the decision.
The ECB left its rate at 2.25% and warned that energy costs may still lift inflation.
The euro has spent most of July inside a narrow band, so the technical levels that have capped and floored it matter this week as much as the macro releases.
| Market indicator | Latest reading | Why it matters for EUR/USD |
|---|---|---|
| EUR/USD | ~1.1406 | Shows the euro’s recovery before the Fed decision |
| US Dollar Index | ~101.19 | A weaker dollar supports EUR/USD |
| US 10-year Treasury yield | ~4.63% | Lower yields reduce the dollar’s appeal |
| Brent crude | ~$92.38 | Lower oil eases US inflation pressure |
| Federal funds rate | 3.50%–3.75% | The Fed must decide: hold or hike |
| ECB benchmark rate | 2.25% | Euro rate outlook also shapes FX direction |
| Immediate EUR/USD resistance | ~1.1447 | Caps recent rallies |
| Immediate EUR/USD support | ~1.1385, then ~1.1325 | Floor of the July range |
The euro’s lift this week was made in the energy market. Brent crude fell more than 6% towards $92 after diplomatic signals eased fears of further escalation in the Middle East, unwinding a risk premium that had briefly pushed prices above $100 earlier in July.
That premium had a direct line into US policy: dearer oil lifts headline inflation, which raised concern that the Fed would stay tighter for longer.
As the premium came out, the 10-year Treasury yield eased towards 4.63% and the dollar softened, and EUR/USD rose about 0.3% to roughly 1.1406. Lower US yields narrow the dollar’s rate advantage, so the euro tends to firm when they fall.
Cheaper energy helps from a second direction: the eurozone imports most of its energy, so a falling oil bill improves its terms of trade and takes pressure off the currency.
The relief is partial. Brent still sits close to 25% above its recent lows, so the inflation impulse has faded rather than gone. The open question is whether this is a pause inside a higher-oil regime or the start of a sustained fall: continued weakness in crude would keep US yields under pressure and support the euro, while a move back above $100 would reverse it quickly.
The Fed interest rate decision on 29 July may be the least surprising part of the meeting, with rates widely expected to stay at the median of 3.50%-3.75%. The Federal Open Market Committee meets on 28-29 July, with the statement due at 2:00 p.m. Eastern Time and Chair Kevin Warsh’s press conference at 2:30 p.m.
In June, the committee held rates, hardened its language on getting inflation back to target, and dropped the rate cut it had previously pencilled in for this year.
Positioning around the July rate decision has shifted fast. Futures implied roughly a 36% probability of a July increase, up from close to 10% a week earlier, which shows how directly the oil move now feeds rate expectations.
| Fed outcome | Market interpretation | EUR/USD impact |
|---|---|---|
| 25bp hike | Strong response to inflation risk | Dollar strengthens, EUR/USD falls |
| Hold, hawkish tone | September hike still possible | Limited or mixed reaction |
| Hold, neutral tone | More data will be needed | EUR/USD supported near 1.14 |
| Hold, dovish tone | Inflation seen easing | EUR/USD rises further |
A hold is still the base case. But with no updated projections at this meeting and less forward guidance under Warsh, the statement wording and the press conference, not the level of rates, carry most of the event risk.
The two inflation gauges the Fed watches are pointing in opposite directions. Headline CPI fell 0.4% in June, its largest monthly drop since April 2020, pulling the annual rate down to 3.5% from 4.2% in May, while core CPI was flat on the month and eased to 2.6% year on year.
The Fed’s preferred measure sits far higher: the May PCE price index rose 4.1% from a year earlier, with core PCE at 3.4% and a firm 0.4% monthly gain.
The two indices diverge because they weight the economy differently and move on different components, so one can cool while the other stays hot. That split is the committee’s real problem.
June’s CPI drop came almost entirely from gasoline, the part of the basket most exposed to oil, so it would reverse fast if crude climbs again, while core PCE points to underlying pressure that remains well above target.
Which gauge the statement leans on will say more about September than the July decision does.
The bigger test comes on 30 July, when second-quarter GDP and the June PCE report both arrive at 8:30 a.m. Eastern Time, a day after the decision. First-quarter growth was revised up to an annualised 2.1%.
The order of events matters. A hawkish statement on Wednesday can be undercut within twenty-four hours by soft growth or a cooler core PCE print, and confirmed by firm data. Any first move in EUR/USD on the decision should therefore be treated as provisional until Thursday’s figures land.
The ECB left its deposit rate at 2.25% on 23 July, after a 25 basis point increase in June, and said it is still watching whether higher energy costs feed into broader prices.
That decision was the euro’s main event of the week, and it landed before the Fed’s. Eurozone inflation was 2.8% in June, down from 3.2% in May but still above target, and staff projections now put average inflation at 3.0% for 2026, largely on energy.
Both central banks are staring at the same question: is the energy shock temporary or lasting?
As long as markets expect the ECB to stay restrictive, the euro keeps a floor. If oil keeps falling, expectations for further tightening fade on both sides of the Atlantic, and the euro’s yield support softens with them.
EUR/USD is tracking US Treasury yields closely right now. The 10-year approached 4.70% when crude was above $100 and has since eased to around 4.63%, and that retreat explains much of the euro’s bounce.
When US yields fall, the dollar’s return advantage over the euro narrows, so the pair drifts higher almost mechanically.
Treasury yields will also give the cleanest read after the meeting. A move back above 4.70% would signal that inflation worry is winning and the dollar is firming again, while a further decline would leave the euro supported.
With no clear trend in place, EUR/USD is unusually exposed to headlines. Four triggers could break the range: a surprise rate rise, explicit guidance towards a September move, a return in Brent above $100, or a real surprise in Thursday’s growth and inflation data. The first three would favour the dollar; only softer data clearly favours the euro.
This forecast is a near-term read. For the structural levels and multi-year trend behind the pair, EBC’s longer-term technical outlook is the better guide.
The near-term EUR/USD forecast rests on a sequence, not a single event: the Fed sets the first reaction on 29 July, and Thursday’s growth and inflation data decide whether it holds.
The pair can stay near 1.14 if Treasury yields keep easing and the statement avoids a hawkish surprise. A rate rise, firm guidance towards September, or renewed strength in oil would hand the dollar its advantage back quickly. As it has all week, the bond market will show the direction first.
