EUR/USD Price Today, August 17, 2026: Euro Tests 1.16 as Dollar Falls for Third Session

Key Takeaways

• EUR/USD is holding close to a two-month high after reaching around 1.1611, with the dollar weakening for a third consecutive session.
• Softer US retail sales, easing inflation and a surprise decline in July payrolls have reduced expectations for another near-term Federal Reserve rate increase.
• The pair has moved above its 200-day exponential moving average, but a sustained break through 1.1600 is still needed to expose the 1.1685–1.1700 resistance zone.

EUR/USD holds near a two-month high

The euro traded little changed against the US dollar on Monday, August 17, while remaining close to its strongest level in two months. EUR/USD briefly reached around 1.1611 before hovering near the psychologically important 1.1600 level, an area that has repeatedly limited rallies in recent weeks.

The latest move extends a recovery that began after the pair found support in the 1.13 region in late July. EUR/USD has since regained the 1.15 handle and moved above its 200-day exponential moving average, improving the technical tone. The euro has also benefited from a broader retreat in the dollar, which has weakened as traders reassess the relative strength of the US economy.

The Dollar Index slipped to a ten-day low near 99.45, while lower short-dated Treasury yields reduced some of the interest-rate support previously available to the currency. The euro consequently rose to a two-month high, although price action around 1.16 remains cautious rather than decisive.

Weak US retail sales add pressure to the dollar

The latest source of dollar weakness was the sharp slowdown in US consumer spending. Retail and food services sales fell 0.6% month on month in July, compared with expectations for a small increase. It was the first monthly decline in nine months and the largest fall in more than a year.

Core retail sales, which feed more directly into gross domestic product calculations, also declined by 0.4%. Some weakness reflected Amazon moving Prime Day into June and lower petrol prices, but the figures still raised questions about third-quarter household demand.

Market pricing placed the probability of a September Fed increase near 30% on Monday, down from approximately 50% a week earlier. That repricing matters for EUR/USD because a lower expected path for US rates can reduce the yield advantage of dollar-denominated assets.

Cooling inflation and weaker employment reshape the Fed outlook

Retail sales are only one part of the changing US economic picture. July consumer inflation also showed signs of moderating. The headline Consumer Price Index rose 3.4% from a year earlier, easing from 3.5% in June, while core inflation slowed to 2.5% from 2.6%.

Inflation remains above the Federal Reserve’s long-term objective, particularly with energy prices elevated. Even so, the softer reading offered less support for an aggressive tightening cycle.

The labour market has also lost momentum. US nonfarm payrolls declined by 23,000 in July, compared with an average monthly increase of 34,000 over the previous 12 months. The unemployment rate held at 4.1%, but the payroll decline reinforced the view that economic exceptionalism in the United States may be fading.

Together, softer spending, cooling inflation and weaker hiring have placed the dollar under pressure for three consecutive sessions. They do not guarantee that the Fed will remain on hold, but they have raised the threshold for another increase and made incoming data more important for the policy debate.

Relative central bank expectations support the euro

The euro’s advance is not solely a dollar story. Expectations that the European Central Bank could increase interest rates in September have also provided support. If US data continue to weaken while eurozone inflation keeps the ECB focused on price stability, the expected policy gap may narrow further in the euro’s favour.

Risks to that view remain. Higher energy costs could slow eurozone growth even if they keep headline inflation elevated, while disappointing business activity figures could weaken the case for tighter ECB policy. Renewed geopolitical stress could also restore safe-haven demand for the dollar, limiting the euro’s upside despite the recent improvement in momentum.

US data and central bank commentary remain in focus

The next phase for EUR/USD may depend on whether upcoming information confirms the US slowdown. Regional manufacturing figures, jobless claims and August business surveys will provide additional evidence on economic momentum.

The minutes of the Fed’s July 28–29 meeting, scheduled for release on August 19, may offer further detail on how policymakers are balancing persistent inflation risks against slower growth. A cautious tone could reinforce pressure on the dollar, while continued concern about inflation could revive expectations for a September increase.

European data and ECB communication will also matter as the September 10 policy meeting approaches. Stronger eurozone activity or more hawkish commentary could help EUR/USD clear 1.16. Weaker data, softer guidance or a rebound in US yields could instead leave the pair trapped below resistance.

For now, EUR/USD remains close to a two-month high, supported by a softer dollar and improving technical momentum. The market’s reaction around 1.1600 will show whether buyers have enough conviction to target 1.1685–1.1700 or whether the latest rally is approaching another pause.