EUR/USD stays steady near two-week highs as traders assess mixed PMI data from the US and Eurozone. The ISM Manufacturing PMI falls to 48.2, indicating a deeper contraction, while the S&P Global PMI rises to 52.2, suggesting growth. The US Dollar shows slight recovery from recent lows but remains under pressure due to expected interest rate cuts by the Federal Reserve in December. The US Dollar Index (DXY) trades around 99.20, after hitting lows near 99.01, influenced by the dropping PMI numbers.

Significant PMI Movements

The ISM Manufacturing PMI’s decline to 48.2 highlights nine months of contraction. The New Orders Index and Employment Index also decreased. In contrast, the S&P Global US Manufacturing PMI shows better production and employment conditions, indicating a more positive outlook. In the Eurozone, the latest Manufacturing PMI falls to 49.6 in November, reflecting ongoing softness. The upcoming week brings important economic data releases for both the Eurozone and the US. This includes the Eurozone HICP preliminary reading and US ISM Services PMI and PCE inflation report. Current currency movements show the changing strength of the US Dollar against major global currencies. Notably, USD gains against the Japanese Yen, while EUR strengthens against USD. The forex market anticipates shifts influenced by upcoming economic data. The market leans towards a weaker US Dollar, spurred by strong expectations of interest rate cuts by the Federal Reserve on December 10th. With EUR/USD climbing towards two-week highs around 1.1630, the trend appears upward for the pair. This sentiment is bolstered by a series of soft economic data, reinforcing the case for the Fed to ease its policies.

Market Sentiment and Strategy

To support this view, we can look at broader trends in 2025. The last Non-Farm Payrolls report for November showed only 110,000 job gains, falling short of expectations, while Personal Consumption Expenditure (PCE) inflation dropped to 2.5% year-over-year, significantly lower than previous highs. The CME FedWatch Tool indicates an 85% chance of a 25-basis-point cut next week, making this Friday’s PCE report crucial. However, the mixed PMI signals warrant caution. The ISM manufacturing survey indicates a deeper contraction at 48.2, while the S&P Global PMI points to growth at 52.2, creating confusion. This week’s ISM Services PMI will be vital; a strong reading could challenge the narrative of an economic slowdown and provoke a sharp reversal in the Dollar. For derivative traders, buying EUR/USD call options that expire after the Fed meeting may be a smart strategy. This allows participation in potential upside if the Dollar weakens further after the cut, while limiting risk if strong data this week leads the Fed to maintain its stance. The conflicting data likely keeps implied volatility high, making defined-risk strategies more appealing than direct spot positions. Historically, we’ve observed instances where the Fed begins an easing cycle despite some areas of economic strength, like during the mid-cycle adjustment in 2019. The central bank typically responds to trends of slowing growth and inflation, which is the prevailing theme right now. Thus, any unexpectedly strong US data would likely only delay, not prevent, the anticipated rate cut. Create your live VT Markets account and start trading now.

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