EUR/USD Firms as Softer US Data Trims Fed Hike Bets, Capping Dollar

The dollar's rebound against major currencies stalled last week after a slew of US economic releases dimmed expectations for further Federal Reserve tightening. With rate hike probabilities pared back, the yield support that had been driving the greenback's recovery faded, allowing EUR/USD, GBP/USD and the commodity bloc to recoup earlier losses. The market's repricing reflects softer momentum in growth and inflation-sensitive indicators, shifting focus toward whether the Fed retains an extended pause rather than delivering additional hikes. For traders, the key implication is that dollar strength now requires an upside data surprise to be sustained, leaving rallies vulnerable to reversal. EUR/USD is likely to remain supported on dips while rate differentials narrow, and USD/JPY faces two-way risk as US yields consolidate. Attention turns to upcoming US consumer-facing data, including retail sales and sentiment readings, alongside Fed commentary for confirmation of the softer policy path. A further downgrade in hike expectations would extend the dollar's corrective phase, while firmer data could quickly restore the rebound narrative.