The EUR/USD pair increased by 0.15%, staying above 1.1600 as the US dollar lost value. This change happened after the Bank of Japan’s Governor Ueda made hawkish remarks and US manufacturing activity slowed down. The US PMI report indicated a drop, with employment in manufacturing decreasing, partly due to tariffs. Speculation about potential changes in US economic leadership also contributed to the dollar’s decline.

European Manufacturing Data

In Europe, the HCOB Manufacturing PMIs showed mixed results. Germany and the Eurozone did not meet expectations. The impact of economic data on EUR/USD is minimal right now, as focus shifts to potential peace talks between Ukraine and Russia. The economic outlook for the US and EU will depend on upcoming data, including the EU’s HICP and the US’s employment and inflation reports. The EUR/USD is near the convergence of the 50- and 100-day SMAs, suggesting possible short-term sideways movement. The Euro is the currency for 20 EU countries and makes up 31% of global forex transactions. The European Central Bank (ECB) manages the Euro’s value by setting interest rates. Inflation data and other economic indicators like GDP and trade balance affect the Euro’s exchange rate. The US dollar is currently weak, creating opportunities for us. Markets expect an 87% chance that the Federal Reserve will cut interest rates this month, supported by recent data. Economic growth has slowed, with last quarter’s GDP adjusted down to 0.8%, while inflation continues to cool.

US and European Monetary Policies

In contrast, Europe is likely to keep interest rates steady for now. Recent inflation data showed the Harmonized Index of Consumer Prices (HICP) at 2.5%, still above the 2% target. This difference in policy between a potential Fed rate cut and a steady ECB should continue to support the Euro against the Dollar. Given this outlook, we should think about positioning for further EUR/USD strength as the year ends. Buying call options on the EUR/USD set to expire in January 2026 could be a smart move to take advantage of this expected increase. This approach lets us benefit from a rise above 1.1600 while limiting potential losses. It’s important to monitor US Core PCE inflation and job data this week. Any unexpectedly strong results could challenge the rate cut narrative and lead to a sudden reversal. Geopolitical events also play a role; any setbacks in Ukraine-Russia peace talks could affect sentiment towards the Euro. The mixed manufacturing data from Germany, highlighting a renewed drop in new orders in November 2025, reminds us that the Eurozone’s economic foundation isn’t entirely stable. Technically, the pair is consolidating around the 1.1600 level, with key moving averages near 1.1642 acting as resistance. A strong break above this line could lead to a test of 1.1700. On the other hand, a dip below the 20-day moving average at 1.1571 would indicate that bullish momentum is fading. Create your live VT Markets account and start trading now.

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