Euro climbs above 1.1400 as US Dollar selloff accelerates

The euro breached the 1.1400 level on Monday, capitalizing on a broad-based US Dollar selloff ahead of Tuesday's CPI report.

EUR/USD rose above 1.1400 on July 13, extending its recent gains as the US Dollar Index slumped on shifting rate expectations and heightened geopolitical tensions.

The move came as traders weighed conflicting signals on monetary policy. Fed funds futures priced a 71% chance of a September rate hike, up from 57% a week earlier, according to CME FedWatch data. Yet the dollar failed to hold its ground as renewed US-Iran hostilities over the weekend pushed oil prices higher, reviving energy-driven inflation concerns that complicate the Fed's path.

The breakout above 1.1400 opens the door to further gains, with traders eyeing Tuesday's US Consumer Price Index report as the next catalyst. A softer inflation print could accelerate dollar selling, while a hot number may test the euro's newfound strength and reinforce the case for a September hike.

The dollar's weakness rippled across asset classes. Gold declined as higher oil prices and rising rate expectations weighed on the precious metal. Silver fell more than 2% to trade near $58.30, remaining range-bound between $55.50 and $62.50, according to FXStreet data. The moves highlight the cross-asset impact of the shifting rate outlook.

In rates markets, Treasury yields moved higher as the market repriced rate expectations. The 30-year bond yield held above 5%, a level that has historically indicated concern about long-term fiscal sustainability. The 10-year yield also rose, reflecting the market's adjustment to a potentially more aggressive Fed.

The geopolitical backdrop added another layer of complexity. The US revoked Iranian sanction waivers over the weekend following attacks on commercial shipping in the Strait of Hormuz, according to press reports. The move pushed crude oil prices toward $72 a barrel, stoking fears that higher energy costs could feed through to broader inflation measures and force the Fed to maintain its tightening bias. The development marks the latest escalation in a conflict that has kept energy markets on edge for weeks.

A sustained dollar selloff carries broader implications for global markets. It typically supports emerging-market assets and commodities while pressuring US multinational earnings by reducing the value of overseas revenue. It also shifts the monetary policy divergence narrative between the Fed and the ECB, potentially reinforcing the euro's upward trajectory if the ECB maintains its hawkish posture. European Central Bank officials have indicated they remain concerned about persistent price pressures in the services sector, keeping the door open for further rate increases even as the Fed considers a pause.

Traders will closely watch Tuesday's US CPI data for June, due at 8:30 a.m. New York time. The report will provide fresh clues on whether inflation is moderating enough for the Fed to pause its tightening cycle — a scenario that could drive the dollar lower and push EUR/USD further above 1.1400. Economists expect headline inflation to moderate, though core measures may remain sticky, according to consensus estimates.

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