Euro climbs past 1.1410 as Sintra tone, CPI data support gains

EUR/USD rose past 1.1410 after ECB President Lagarde struck a hawkish tone at the Sintra conference and June HICP data showed inflation peaking at 3.2%.

"The combination of a less-dovish-than-expected ECB and signs that Eurozone inflation has peaked gives the euro a clear catalyst to extend gains," said Chris Turner, global head of markets at ING.

Eurozone headline inflation eased to an estimated 2.7% in June from 3.2% in May, pulled lower by energy price declines and a seasonal pullback in travel costs. The core rate also dipped modestly, according to ING's estimates. Market pricing now reflects another quarter-point hike by October, down from two moves priced in earlier this month. Lagarde said at Sintra that second-round effects have not materialized, reducing the need for "forceful action" even as the ECB maintains its tightening bias.

The euro's breakout above 1.1410 opens the door to further gains toward 1.1450, though ING expects selling pressure to build above that level. The next test comes Thursday with US payrolls data, where a 115,000 print would likely be too soft to revive dollar buying while remaining robust enough to avoid recession fears.

Dollar Yields Slide as Rate Expectations Reset

The dollar index edged lower as US rate expectations continued to ease from post-FOMC highs. The 10-year Treasury yield retreated to around 4.20%, narrowing the rate differential that had supported the greenback through June. Across the Atlantic, Eurozone bond yields also declined, with the German 10-year Bund yield falling in tandem, limiting the spread compression that would typically cap euro gains.

ING's analysis suggests the dollar's overbought conditions from the post-FOMC breakout are still being unwound, leaving room for EUR/USD to extend its recovery before sellers re-emerge. The firm sees resistance building into the 1.1450-1.1500 zone, where short-term moving averages and option barriers could cap further upside. Month-end and quarter-end rebalancing flows could add to dollar volatility, with relative equity performance over the quarter potentially supporting USD/JPY, though intervention risks remain a focus for that pair.

Euro Strength Ripples Through G10 FX

The euro's gains have spread across the G10 complex. EUR/GBP is testing the lower end of its multi-month range near 0.8550, with ING flagging a "treacherous triangle" pattern that risks a downside break favoring sterling. Against the Norwegian krone, the euro has climbed toward 11.30, with scope for further gains toward 11.40-11.50 as long as oil prices remain subdued. USD/NOK continues to target the 10.00 level, according to ING.

In North America, USD/CAD has pulled back from its 1.42 test as the dollar rally fades, though the USMCA deadline this week presents headline risk for the loonie. The Canadian dollar's direction will also depend on April GDP data due Tuesday, where ING expects a 0.3% increase.

This article is for informational purposes only and does not constitute investment advice.