Dollar Firms as Tariff Refunds and Cooling Inflation Reshape EUR/USD
The greenback is holding the upper hand against the euro and yen as traders weigh the impact of pending US tariff refunds against softer-than-expected PCE inflation.
A two-track dollar story
The US dollar has spent the last fortnight pinned in a tight range, but the underlying narrative is anything but quiet. Two large forces are pulling at the greenback at the same time: an expected wave of corporate tariff refunds that could shave the trade deficit narrative, and a fresh batch of PCE inflation data that came in below consensus at 2.4% year on year.
For now, the dollar index is consolidating around 99.10–99.20, holding the ascending channel from late April. EUR/USD continues to grind under the 1.0950 ceiling that has capped every rally since the ECB's hawkish minutes were released.
What the price action is telling us
- EUR/USD is range-bound between 1.0820 support and 1.0950 resistance. A close above 1.0960 opens 1.1030, while a break of 1.08 exposes 1.0720.
- GBP/USD remains the firmest G10 currency against the dollar, supported by sticky UK services inflation and a Bank of England that is in no rush to cut.
- USD/JPY is the most volatile pair on the board. The Bank of Japan's reluctance to commit to further hikes is offsetting the natural yen tailwind from lower Treasury yields.
What to watch next week
Euro area flash inflation prints from Germany, France, Italy and Spain land first. A core HICP print above 2.6% would re-energise the hawkish ECB camp and likely cap any dollar strength against the euro. After that, US ISM services and the May payrolls report will decide whether the dollar's quiet bid turns into something more durable.
Traders running tactical positions should respect the channel, fade the extremes, and keep stops tight — the moment one of these two narratives breaks, the dollar will move quickly.