EUR/USD Falls to 1.1400 After Eurozone Inflation Miss

EUR/USD Dips Back to 1.1400 Following Disappointing Eurozone CPI Print

The EUR/USD pair dropped from Monday’s intraday high of 1.1450 to hover near 1.1410 in Tuesday’s European session, pressured by a softer-than-expected Eurozone inflation report. The data has bolstered market expectations for a rate cut by the European Central Bank (ECB) at its upcoming policy meeting.

Eurozone Inflation Falls Below ECB Target

Eurostat’s flash estimates showed that headline inflation in May dropped to 1.9% YoY, from 2.2% in April, below the ECB's 2% target. The core CPI also disappointed, falling to 2.3% YoY, versus 2.7% previously and a market expectation of 2.5%.

“With both headline and core inflation slowing, the ECB is now under increasing pressure to act,” analysts at Tredu commented. “Markets are already pricing in a high probability of an interest rate cut this Thursday.”

ECB Rate Cut Speculation Gains Momentum

The ECB is widely expected to deliver its eighth consecutive rate cut, with President Christine Lagarde likely to reiterate a data-dependent approach to future monetary policy. The dovish tone could add further downside pressure on the Euro in the short term.

US Dollar Struggles to Recover

Despite the EUR’s weakness, the US Dollar (USD) remains under strain, hovering near multi-week lows. The lack of clear direction from the Trump administration’s trade policy and concerns about long-term US fiscal health continue to weigh on the Greenback.

Additionally, the US ISM Manufacturing PMI for May came in at 48.5, down from April’s 48.7, confirming the negative effects of tariffs on factory output and further limiting the USD’s ability to stage a full recovery.

Related Tredu Articles:

• Eurozone CPI Miss Raises Rate Cut Bets
• EUR/USD Forecast: What’s Next After 1.1400 Dip?
• How Inflation Shapes ECB Decisions