EUR/USD is set to end the week with a loss of 0.21%, yet it remains above the 1.16 figure for the third consecutive day, with its gains capped by key resistance levels after US data could not stop the Fed from cutting rates.
Euro supported by upbeat PMI; Moody’s warning on France limits upside momentum
Inflation data in the US won’t move the needle in Fed hawks’ favor, with estimates missing the downside, though it remains a far cry from the central bank’s 2% target. After that, S&P Global showed the economy is showing signs of strength as PMIs for manufacturing and services expanded in October.
Meanwhile, the University of Michigan (UoM) closed the docket for the day as the US government shutdown reached its twenty-fourth day, which showed that US consumers are becoming a bit pessimistic, while estimates are that prices may continue to rise.
Recently, the greenback pared some of its gains as the Trump administration launched a trade investigation into whether China has complied with a limited trade deal signed in 20202 during President Donald Trump’s first term, Bloomberg revealed.
In Europe, the HCOB Flash Purchasing Managers’ Index (PMI) rose to 50 from 49.8 and 52.6 from 51.3 in October, respectively. Both prints were above forecasts, a sign that business activity is increasing due to increased demand.
At the time of writing, Moody’s Ratings changed France’s outlook to negative, affirming the AA3 rating, saying, “France’s political instability is hampering its ability to address key policy challenges such as high fiscal deficits, rising debt burdens and rising debt burdens.”
Daily Market Movers: EUR/USD holds firm despite solid US PMI data
- The US Dollar Index (DXY), which tracks the dollar’s value performance against its rivals, was up 0.03% at 98.94, limiting EUR/USD’s gains.
- The US consumer price index (CPI) rose 3.0% in the 12 months to September, slightly below the forecast of 3.1% and slightly higher than August’s 2.9% reading. The core CPI – which excludes food and energy – rose 3.0% year-on-year, down one-tenth from the previous month.
- US business activity accelerated in October, the second-fastest pace so far this year, according to preliminary “flash” PMI data from S&P Global. The report also highlights the strongest growth in new business seen so far in 2025, underscoring the continued resilience of private sector output. The S&P Global Manufacturing PMI rose to 52.2 in October from 52.0 in September, indicating continued expansion in the sector. The Services PMI rose to 55.2 from 54.2, the highest level in three months and underscoring solid momentum in business activity.
- The University of Michigan’s consumer sentiment index dropped to 53.6 from an initial reading of 55.0 in October, missing expectations of 55.1. One-year inflation expectations eased slightly to 4.6% from 4.7% in September, while the five-year outlook rose to 3.9% from 3.7%.
- On expectations that the US central bank could cut rates by 25 basis points to a range of 3.75% – 4%, traders are already anticipating an additional 0.25% cut for the December meeting.
Technical outlook: EUR/USD consolidates, but slightly bullish
The technical outlook for EUR/USD has improved marginally but remains neutral as the pair is trading below the confluence of the 20-day and 100-day Simple Moving Averages (SMA) at 1.1653 and 1.1658, respectively. The Relative Strength Index (RSI) has slipped below the neutral 50 mark, indicating increasing bearish momentum.
Immediate support is seen at 1.1600, followed by 1.1550 and 1.1500. A clear break below this area would highlight the August 1 cycle low around 1.1391. On the positive side, resistance remains in line with the 20- and 100-day SMA, while a decisive move above 1.1700 will open the way towards 1.1800 and the July 1 high at 1.1830.
Euro FAQ
The euro is the currency of the 19 European Union countries that belong to the eurozone. It is the second most traded currency in the world after the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of more than $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, with an estimated 30% discount on all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the eurozone. The ECB sets interest rates and manages monetary policy. The primary mandate of the ECB is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is to increase or decrease interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by the six permanent members, including the heads of the eurozone’s national banks and ECB President Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the euro. If inflation rises more than expected, especially if above the ECB’s 2% target, the ECB is forced to raise interest rates to bring it back under control. The euro will generally benefit from relatively higher interest rates compared to its peers, as it makes the region more attractive as a place for global investors to park their money.
The data release reflects the health of the economy and could have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can influence the direction of the single currency. A strong economy is good for the euro. This not only attracts more foreign investment but it could also encourage the ECB to raise interest rates, which would directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to decline. Economic data from the euro area’s four largest economies (Germany, France, Italy and Spain) are particularly important, as they account for 75% of the euro area economy.
Another important data release for the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period. If a country produces highly demanded exports the value of its currency will be derived entirely from the additional demand generated from foreign buyers wishing to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.
