Monthly Wrap: EUR – Euro soars to multi-month highs on strong data and USD weakness 

Key takeaways: 

• Strong GDP and rising inflation boost the euro 
• A tumbling US dollar also pushes EUR higher  
• EUR monthly lows: £0.83, $1.07, AU$1.60, NZ$1.75, C$1.47 
• EUR monthly highs: £0.86, $1.10, AU$1.70, NZ$1.85, C$1.52 

The euro was subdued in early July in the wake of the French parliamentary elections. Relief that the far-right National Rally (RN) party had not won an outright majority was quickly replaced by concerns that the three main factions in French politics would not be able to form a coalition government. 

A lack of data then left the single currency rudderless for much of July, until a larger-than-expected decline in German economic sentiment put some pressure on EUR. 

The European Central Bank (ECB) interest rate decision resulted in some mixed movement in the euro. The bank left rates unchanged, as expected, and signalled that another cut in September remained uncertain. 

However, EUR exchange rates then rallied in late July and early August amid signs of strength in the Eurozone. Second-quarter GDP in the bloc exceeded expectations, with the economy expanding 0.3% versus 0.2%, while July’s consumer price index showed a surprise uptick in inflation. 

The euro also benefitted from its strong negative correlation with the US dollar, as the American currency suffered a significant selloff. 

Looking ahead, Germany’s economic sentiment index for August is the first major release due out. If we see another deterioration in investor morale then EUR could face headwinds. 

August’s preliminary PMI results could then provide the euro with support later in the month. At the time of writing, forecasters expect to see an improvement in Eurozone business activity. 

Perhaps the most important release, however, is at the very end of the month – the latest CPI figures. Could another surprisingly strong inflation reading see EUR leap higher? 

Elsewhere, French politics could trigger some volatility in the euro. Parliament returns from the summer break at the very beginning of September, and the main parties will need to find a way to reach a consensus over the 2025 budget.