Euro gains as US budget deficit increases and eurozone sentiment improves in may 2025

EURUSD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	0.56%	63.5 Pips
Week to-date	1.01%	115.5 Pips
June	1.45%	164 Pips

Upcoming key events (London Time)

Thu 01:30 PM USD PPI excluding Food and Energy sectors (12-mth)
Fri 07:00 AM EUR Harmonised Index of Consumer Prices (HICP) (12-mth)
Fri 03:00 PM USD Index of Consumer Sentiment

What happened lately

In the United States, economic indicators for May 2025 reflect some shifts in fiscal and inflationary conditions. The U.S. Monthly Treasury Budget Statement notably declined to a deficit of 316 billion dollars from a surplus of 258 billion dollars in April, highlighting increased government expenditure or decreased revenue. Meanwhile, consumer price inflation exhibited a modest increase; the CPI inflation rate edged up slightly to 2.4% from 2.3% in the previous month. However, the core inflation rate, excluding volatile food and energy prices, remained steady at 2.8%, though the month-over-month increase slowed to 0.1% from 0.2%. This indicates relatively flat underlying inflation pressures, suggesting that while headline inflation saw a slight rise, the underlying trend remains stable.

In the Eurozone, there was significant improvement in economic sentiment as reflected by the sentix Economic Index. In June 2025, the index improved notably to 0.2 points from a negative 8.1 points in May. This positive shift in sentiment suggests an improving perception of the Eurozone’s economic prospects among investors and analysts, potentially driven by more favorable economic developments or expectations.

The recent performance and expected economic data releases could lead to EURUSD fluctuations. On one hand, the improvement in the Eurozone’s economic sentiment index supports the euro. Conversely, U.S. economic data reflects mild inflationary pressures and a significant budget deficit. The contrasting economic outlooks between the U.S. and the Eurozone might contribute to the EURUSD’s recent rise to 1.14877, reflecting a relatively stronger euro. Upcoming high-impact economic events, such as the U.S. PPI and Index of Consumer Sentiment, along with Europe’s Harmonised Index of Consumer Prices, may provide further market adjustments. Traders and analysts will closely monitor these indicators for indications of inflationary trends and economic sentiment, which could exert additional influence on the currency pair’s direction in the foreseeable future.

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What can we expect from EURUSD today?

EURUSD on Wednesday rose 0.56% to 1.14877. Price is above 9-Day EMA while Stochastic is rising.

Updated daily direction for EURUSD looks bullish as the pair ended higher after Wednesday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 1.15232 with break above could target R2 at 1.15586 or figure level area. While towards the downside, we are looking at daily low of 1.14049 as an important support. Break below this level could weaken the current bullish momentum. A break above 1.14995 may suggest continuation after recent positive movement.

For the week to-date, take note that EURUSD is bullish as the pair continued to trade higher and is up by 1.01% over the past few days.

Key levels to watch out:

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