Euro rises to June highs as falling US Treasury yields weigh on US Dollar

The news is near-term bullish for EUR/USD because it combines two reinforcing forces: a decline in long-dated US Treasury yields and a reduction in expectations for an imminent Federal Reserve rate hike. Lower US yields reduce the dollar’s carry advantage and make euro-denominated assets relatively more attractive.

The Treasury’s decision to at least double buyback operations in longer-dated securities triggered a sharp fall in long-end yields, with the 30-year yield reportedly declining about 9 basis points toward 5.20%. This is important for FX because the long end had been supporting the dollar through higher US term premia and tighter financial conditions. If the yield decline persists rather than representing a temporary technical reaction, it could extend dollar weakness across major currencies and support EUR/USD momentum.

The euro also has a relative-rate tailwind: markets reportedly continue to price an ECB rate increase in September, while expectations for a Fed hike have eased. That policy divergence is more supportive of EUR/USD than the Treasury announcement alone, although the euro’s upside depends on the ECB maintaining a sufficiently hawkish stance despite still-moderate underlying growth. Eurozone core HICP was confirmed at 2.5% year over year, reinforcing the market’s sensitivity to further ECB tightening expectations.

Market bias:

bullish EUR/USD in the short term, with the move potentially extending toward the June highs if US yields continue falling and the dollar remains broadly offered. The move is less convincing as a medium-term trend signal unless incoming US data continue to weaken or the Fed minutes validate a less hawkish policy outlook.

The main event risk is the July FOMC minutes. A hawkish discussion—particularly evidence that officials still favor a rate increase—could lift Treasury yields and trigger a reversal in dollar selling. Conversely, confirmation of a divided or less hawkish Fed would strengthen the current EUR/USD narrative.

Traders should monitor the persistence of the US long-end yield decline, Fed repricing, ECB communication ahead of the September meeting, and whether EUR/USD can hold its breakout above the June-area highs. A rebound in US yields or a deterioration in ECB rate expectations would weaken the bullish interpretation.