EUR/USD flat as traders brace for Fed verdict, Euro sentiment brightens, US data mixed

• EUR/USD slips below 1.1550 as traders digest mixed US data and monitor Middle East tensions.
• US Retail Sales dropped 0.9% in May, but the GDP-linked control group rose 0.4%; industrial production disappointed.
• Markets await Wednesday's Federal Reserve decision for clearer direction before fresh positioning in EUR/USD.

The Euro (EUR) weakens against the US Dollar (USD) on Tuesday, with the EUR/USD pair treading water as traders digest a steady Greenback despite disappointing Retail Sales data and ongoing geopolitical tensions stemming from the Iran-Israel conflict.

The EUR/USD pair edges lower during the American session, slipping toward 1.1514 after Monday's failed attempt to sustain gains above the 1.1600 psychological barrier. Meanwhile, the US Dollar Index (DXY) holds firm above the 98.00 mark, last seen trading near 98.35 as traders stick to the Greenback amid safe-haven flows.

Latest figures from the United States painted a mixed macroeconomic picture. Retail sales dropped by 0.9% MoM in May -- the sharpest decline in four months -- as consumers curbed spending ahead of looming tariffs. However, the Retail Sales Control Group, which contributes to Gross Domestic Product (GDP), surprised to the upside with a 0.4% increase. Meanwhile, US industrial production slipped 0.2% in May, falling short of market forecasts for a modest increase, highlighting pockets of weakness in the manufacturing sector.

On the European front, sentiment data showed a positive surprise. The ZEW Indicator of Economic Sentiment for the Euro area surged by 23.7 points to 35.3 in June, well above expectations of 23.5, suggesting growing optimism about the bloc's economic outlook despite ongoing geopolitical headwinds. In fixed income markets, Eurozone government bond yields nudged higher on Tuesday as traders remained cautious amid the uncertain trajectory of the Middle East conflict. Germany's 10-year benchmark yield rose by one basis point to 2.54%, while the two-year Schatz yield ticked up to 1.85%, reflecting a modest risk premium and guarded investor sentiment.

Looking ahead, traders are likely to stay on the sidelines ahead of Wednesday's Federal Reserve policy decision, waiting for fresh signals on the economic outlook and future rate path before placing new bets. In Europe, attention will turn to fresh Eurozone inflation figures (HICP) and remarks from European Central Bank officials including Knot, Nagel, and Villeroy, all scheduled for Wednesday, which could offer further clues on the ECB's next policy moves.