The Euro (EUR) demonstrated resilience against both the Canadian Dollar (CAD) and the US Dollar (USD) on Monday, despite mixed economic data from Germany and the Eurozone. Against the CAD, EUR/CAD traded around 1.6180, maintaining positive territory after opening with a bullish gap, supported by a combination of upbeat manufacturing data and a weakening Canadian Dollar due to falling crude oil prices [1]. German Retail Sales fell by 1.1% month-on-month in June, a sharper decline than the forecasted 0.5%, following a revised 1.2% rise in May. On an annualized basis, retail sales slipped 0.2%, down from the previous month's 2.1% growth [1][2]. However, the S&P Global Germany Manufacturing PMI reached a four-month high of 52.2 in July, up from 50.3 in June, indicating a rebound in factory performance. The Eurozone Manufacturing PMI was revised down to 51.9 in July from an earlier estimate of 52.0, but still marked an improvement from June's 51.4 and the best performance since April [1][2].
European equities outperformed as Brent crude oil prices fell by 6.88% to $90.12 per barrel, easing geopolitical concerns after US President Donald Trump announced a pause on planned military strikes against Iran. This development, along with hopes for new peace talks between the US and Iran, contributed to a moderate risk-on mood and further supported the Euro [1][2]. However, Iran’s Foreign Ministry Spokesperson Esmail Baghaei denied any talks with the US regarding the Strait of Hormuz [2].
Analysts at Deutsche Bank noted that the pullback in Brent crude created a more supportive backdrop for European indices by tempering immediate geopolitical and commodity-related risks [1]. ING analysts commented that EUR/USD "should probably be doing better," given the decent Eurozone data, lower oil prices, and significant dollar selling from Japan, but they doubt that these factors will have a lasting impact on the Euro. Instead, they emphasize that the Federal Reserve’s (Fed) September decision and upcoming US data will be the key drivers for EUR/USD, potentially determining whether the pair tests resistance at 1.1615/20 or falls back below 1.15 [2][3].
ECB Governing Council member Kocher reiterated a data-dependent approach, stating that decisions on Euro area inflation will be made in the autumn based on incoming data, reinforcing a cautious stance. While Kocher highlighted upside inflation risks due to geopolitical developments, the lack of explicit tightening language suggests limited immediate support for the Euro unless economic data re-accelerate [1].
CONCLUSION
The Euro remains supported by improved manufacturing data and lower oil prices, despite disappointing German retail sales and ongoing geopolitical uncertainties. Market participants are now focused on the upcoming Federal Reserve decision and US economic data, which are expected to be the primary drivers of the EUR/USD trend in the near term.