EUR/USD Tumbles to Mid-2025 Lows as US Dollar Gains Momentum

The EUR/USD has fallen to its lowest level since mid-2025 as the US Dollar maintains broad-based momentum. This is driven by elevated long-dated US Treasury yields and shifting expectations for Federal Reserve monetary policy. Market participants are closely monitoring upcoming ADP payrolls and PCE inflation data to gauge the likelihood of an October rate hike.

Thu Lan Nguyen at Commerzbank suggests that EUR/USD's decline reflects elevated pricing for Fed tightening relative to the European Central Bank. However, she believes the US Dollar appears stretched against underlying interest rate differentials, making it vulnerable to a moderate pullback if the Fed fails to signal further rate increases.

Francesco Pesole, Frantisek Taborsky, and Chris Turner at ING take a more supportive view on the Greenback. They argue that elevated long-end yields and persistent risk aversion continue to buffer the US Dollar against soft economic releases. The upcoming PCE inflation data could drive October Fed hike odds higher, making it premature to call a top in the US Dollar move.