A contradictory picture is forming simultaneously in both the geopolitical and macroeconomic contexts. For instance, the ISM Manufacturing Index supported the dollar, while Tuesday's Eurozone inflation data has bolstered the euro. Amid continued uncertainty, traders in the EUR/USD pair are reacting to these releases within the range of 1.1610–1.1670, where the pair has traded for the third consecutive week.

On Monday, the ISM Purchasing Managers' Index (PMI) for US manufacturing entered the "green zone," hitting a four-year high. Instead of the expected rise to 53.3, the index jumped to 54.0, marking its highest value since May 2022. The index has been in the expansion zone for the fifth consecutive month, and the report's key subindices also supported the greenback.

The main driver of growth was the new orders subindex, which reached 56.8, adding 2.7 points. This indicates robust domestic demand. Of the six largest industrial sectors, four reported net growth (computer and electronic products, chemicals, transportation equipment, and machinery). Export demand also returned to the expansion zone, rising to 50.6. Against this backdrop, the production subindex climbed to 54.3.

The prices subindex saw a slight correction after its April surge to 84.6. In May, this indicator fell to 82.1. On the one hand, prices remain extremely high—manufacturing companies are forced to operate amid rising raw-material and logistics costs (more than half of the survey participants noted high price volatility as a key issue for business). On the other hand, the downward trend of the subindex signals that the pace of price growth is indeed slowing.

The employment subindex remains in the contraction zone at 48.6. However, there is a glimmer of hope here: in May, this figure showed a marked improvement, rising by 2.2 points. This suggests that the industrial sector is now cutting jobs more slowly.

The Supplier Deliveries subindex is also holding at a high level of 60.6, which measures the speed of delivery of raw materials and supplies from suppliers to manufacturers. However, it should be clarified that this indicator operates under reverse interpretation, so such a high value indicates a continued slowdown in deliveries. This is a mixed signal: on the one hand, it reflects strong demand in the manufacturing sector, while on the other, it indicates ongoing supply chain issues.

Overall, the May ISM report suggests that the US manufacturing sector is in a phase of sustainable, albeit uneven, recovery: demand and production are increasing, inflationary pressure persists, and the labor market remains relatively weak.

Reacting to this release, the EUR/USD pair hit a local low on Monday, dropping to 1.1607. However, sellers could not extend their success, and the trading day ended in the middle of the "working" range at 1.1633.

Moreover, on Tuesday, EUR/USD buyers seized the initiative following the release of Eurozone inflation data. The overall consumer price index has shown an upward trend for the fourth consecutive month, reaching 3.2% in May (the highest level since November 2023). The core CPI, excluding energy and food prices, accelerated more than expected, rising to 2.5% (with a forecast of 2.4%). This marks the strongest growth rate since April of last year.

The rise in core inflation is a particularly concerning signal for the European Central Bank. It indicates that price pressures are becoming broader and are no longer confined to the energy sector. This pressure has embedded itself within consumption structures through secondary effects—rising logistics costs are being passed on to final industrial goods and services. The acceleration of inflation in the services sector (to 3.5%) is especially worrisome, as this component reflects internal price pressure and wage dynamics.

Overall, the May results leave little room for the "dovish wing" of the ECB to argue for a softer stance (especially given the upward reversal in the core component). Some analysts (notably from JP Morgan) have already stated that Tuesday's release essentially guarantees a 25-basis-point interest rate hike by the ECB at its meeting next week.

Against this backdrop, the EUR/USD pair has risen slightly but remains within the range of 1.1610–1.1670. Under the current circumstances, the pair will likely continue to test the boundaries of this price range, regardless of the significance of the published macroeconomic data. Traders are awaiting the resolution of US-Iran negotiations and are hesitant to open large positions (either in favor of the dollar or against it) amid ongoing uncertainty about the prospects of the diplomatic process. On one hand, Tehran has announced a halt to dialogue, citing the expansion of Israel's military operation in Lebanon. On the other hand, Trump has stated that he convinced Netanyahu to abandon plans to attack the southern suburbs of Beirut. According to the US President, a memorandum of understanding between Washington and Tehran could be signed as early as next week. According to Mehr news agency, Iran is still considering the draft agreement with the US.

Thus, the intrigue remains, making it prudent to implement a range trading strategy: opening short positions as the price approaches the upper boundary of the range (1.1670) and long positions as it declines to the lower boundary (1.1610).