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EUR/USD retreats as strong US PMI lifts Dollar, Powell in focus
Friday, 22 August 2025 05:21 WIB | EUR/USD |EUROPE

EUR/USD retreats some 0.40% during the North American session as the Greenback posts solid gains following the release of economic data from the United States (US). Strong figures regarding business activity outweighed a soft jobs report, pushing traders to trim bets for a Federal Reserve rate cut at the September meeting. The pair trades at 1.1604 after reaching a daily high of 1.1662.

Market sentiment shifted sour as investors await Fed Chair Jerome Powell's speech. S&P Global revealed August's Purchasing Managers Index (PMI) surveys that showed that business activity in the manufacturing and services sectors in the US gained traction and supported the Dollar.

Labor market data in the US shows that it is cooling as the number of Americans filing new applications for unemployment benefits rose to its highest level in the last three months.

The EUR/USD is set to extend its gains due to central bank monetary policy divergence. The European Central Bank (ECB) is projected to hold rates unchanged at the next meeting, while the Fed, although the chances have trimmed, is expected to resume its easing cycle.

Nevertheless, Regional Fed Presidents like Cleveland's Beth Hammack, Kansas City's Jeffrey Schmid, and Atlanta's Raphael Bostic were hawkish earlier, favoring the fight against inflation, as they expressed that risks of the employment mandate remain in the backseat.

Eyes would turn to Powell on Friday. A dovish tilt could push the EUR/USD higher as the interest rate differential would be reduced between the US and the European Union (EU). Otherwise, the Dollar could stage a recovery after reaching yearly lows of 96.37, as depicted by the US Dollar Index (DXY).

Source: Fxstreet

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