EUR/USD Hits 4-Year High at 1.0980 on US Stagflation Concerns

EUR/USD surged to 1.0980, its highest level since 2021, as US economic data pointed to stagflationary pressures. US PCE inflation accelerated to 2.8% year-over-year while consumer spending growth slowed to 0.2%, below the expected 0.4%. The toxic combination of rising prices and weakening demand sparked a broad dollar selloff, with the DXY falling 0.6% to 105.40. European data provided contrast, with German business confidence unexpectedly improving. Technical momentum remains strongly bullish, with EUR/USD breaking above the 1.0950 resistance zone. The next target sits at 1.1000 psychological level, with support now at 1.0920. Rising US inflation expectations have reduced real yield differentials, favoring the euro. Traders are reassessing Fed rate cut expectations, with markets now pricing only one 25bp cut by year-end versus two previously expected.