Euro Rises Above 1.1650, Supported by Optimistic German Macroeconomic Data

EUR/USD traded narrowly above 1.1660 on Tuesday, with the current price at 1.1663, not far from the three-month high of 1.1710 hit last week. The dollar remains under pressure overall, as concerns over damage to Federal Reserve independence following the U.S. Treasury's bond buyback program continue to weigh on the greenback.

**Improving German Data, Rising Eurozone Recovery Expectations**

The latest Eurozone composite PMI for July rose to 51.9, returning above the 50 boom-bust line into expansion territory, significantly beating market expectations. Among them, Germany's composite PMI climbed from 49.5 to 51.2, ending three consecutive months of contraction, with the manufacturing sub-index performing particularly strongly. France's composite PMI also recovered from 47.2 to 49.6, the highest level since the outbreak of the Middle East conflict. The simultaneous improvement in the two largest economies, Germany and France, provides fundamental support for the euro.

**Dollar Pressure Logic Unchanged, but Upside Limited**

The core driver of dollar weakness remains market concerns over the independence of Fed policy. Following the U.S. Treasury's bond buyback program, investors worry that Fed monetary policy may be constrained by fiscal factors, a sentiment that continues to weigh on the dollar index. However, the euro faces technical resistance near 1.1710, and a short-term breakout would require more catalysts.

**Risk Factors Persist, Oil Prices and Inflation Are Variables**

Despite the optimistic German data, escalating U.S.-Iran tensions have pushed oil and gas prices higher, reigniting inflationary pressures. Market sources indicate that European Central Bank officials still lean toward discussing further rate hikes in September, and uncertainty over the policy path may limit further euro strength. Going forward, attention should be paid to the potential impact of energy price trends on the Eurozone's recovery momentum.