EUR/USD Forecast July 2025: Reforms, Tariffs, and Market Response
With geopolitical tensions easing, traders' attention has shifted squarely back to the headline-making fiscal package, the so-called "One Big Beautiful Bill." This sweeping tax and budget reform, which broadens many first-term measures, has cleared both houses of Congress and now awaits the President’s signature—timed for U.S. Independence Day.
Notably, the legislation has triggered public friction between President Trump and Elon Musk, after the latter—previously a key White House advisor—walked away from the administration. While the President called the bill “the start of a new Golden Age,” markets remain wary: Congressional Budget Office (CBO) projections show the measures will balloon the U.S. deficit by roughly $3.3 trillion over the next decade, and could leave millions uninsured. The bill channels $150 billion each to defense and border security, funded through cuts to social spending—shifting the burden toward lower-income Americans, while tax breaks overwhelmingly benefit the wealthy. Meanwhile, a stand-off continues between Trump and Fed Chair Jerome Powell over the future of monetary policy, with the President openly calling for new central bank leadership.
On the global trade front, only a new U.S.-Vietnam agreement has been finalized; talks with other major economies remain stalled.
ECB Forum: Policy Risks and the Dollar’s Status
The annual forum in Portugal brought together central bankers from Europe and Asia to debate the risks of monetary policy amid trade escalations and the challenge of balancing neutral rates with inflation expectations. While consensus is clear that the U.S. dollar will retain its reserve dominance, the euro’s aspirations hinge on deeper capital market integration and stronger geopolitical standing. ECB President Christine Lagarde emphasized the onset of a more volatile global era, underscoring the need for eurozone reforms if the euro is ever to rival the dollar as a global reserve.
U.S. Economy: Jobs and PMI Surprises
Early July brings a flood of U.S. labor market data. According to the Bureau of Labor Statistics, job openings surged to 7.769 million in May (up from 7.395 million and beating the 7.3 million forecast). The ADP report disappointed, showing a 33K decline in private sector jobs (vs. +95K expected), but this was offset by a robust Nonfarm Payrolls print: +147K jobs in June, handily beating the 110K consensus. Unemployment dropped to 4.1% (vs. 4.3% expected), with labor force participation at 62.3%. Average hourly earnings eased to 3.7% y/y.
ISM indices added further tailwinds to the dollar, with manufacturing PMI up to 49.0 (May: 48.5) and services PMI climbing to 50.8 (May: 49.9)—both exceeding market forecasts.
Eurozone: Modest Inflation and Sluggish Consumption
The euro area reported a 2% annual inflation rate (HICP) for June, precisely matching projections. Core inflation reached 2.3% y/y, with monthly price growth at 0.3%. In Germany, annual inflation also eased to 2%, while retail sales advanced by 1.9% in May (April: 2.9%).
Looking ahead, markets are watching for Germany’s final inflation readings, fresh eurozone retail sales data, and the FOMC minutes. Political and fiscal headlines on both sides of the Atlantic will remain the main market drivers.
EUR/USD remains in strong uptrendEUR/USD Outlook: Bullish Trend, Local Overbought Signals
Technically, EUR/USD is stretched in overbought territory, yet the broader bullish trend remains intact. On the weekly chart, the pair has established new higher highs and higher lows, closing above prior peaks. RSI readings are firmly above 70, signaling no immediate overheat, while the 20-day moving average is climbing steeply, with the 100- and 200-day averages well below.
On the daily timeframe, the pair holds above all major averages, with the 20-SMA providing immediate support at 1.1600. Momentum is moderately strengthening and RSI hovers around 70. Initial support stands at the weekly low of 1.1717, followed by 1.1631; a breakdown could open a corrective leg to 1.1500, but short-term downside risk remains limited. Resistance levels are seen at 1.1830 and the psychological 1.1900. A confident break would pave the way to the 1.2000 area.