EUR/USD is steady around 1.1850 after dropping over 1% on Friday. Although the Eurozone and German manufacturing PMI revisions were positive, the Euro is struggling against a stronger US Dollar. This strength in the Dollar is linked to Kevin Warsh’s nomination as the next Federal Reserve Chair.

Market Expectations For US Manufacturing Data

US President Donald Trump’s choice of Warsh, who favors a smaller Fed balance sheet, has provided some relief in the markets. In Europe, manufacturing growth in January surpassed expectations, with the Eurozone PMI updated to 49.5 and the German PMI to 49.1. Now, all eyes are on the upcoming US manufacturing data. The market is keenly awaiting economic updates, such as the European Central Bank’s monetary policy decision and the US Nonfarm Payrolls report. Warsh’s nomination has positively affected market sentiment, although he remains cautious about inflation risks. German retail sales saw a slight rise of 0.1% in December, which was unexpected since a decline was anticipated. Meanwhile, the US is expecting January’s ISM Manufacturing PMI to rise to 48.3. Currently, EUR/USD is trading just above 1.1835, with indicators pointing to a bearish trend. Traders are closely monitoring US manufacturing data, including the ISM Manufacturing PMI and Prices Paid metrics, to gauge future economic conditions. EUR/USD is currently around 1.1850, primarily influenced by the market’s response to Warsh’s Fed Chair nomination. This points to a potentially hawkish policy, which is boosting the US Dollar against the Euro. We should expect dollar strength to continue dominating the market in the upcoming weeks. Later today, we will see the US ISM Manufacturing PMI figures. The market predicts a slight improvement to 48.5. Remember, this indicator has been below 50 for over a year, indicating a slowdown in manufacturing that we observed throughout 2025. A number that exceeds expectations could significantly drive the dollar’s strength.

European Central Bank Meeting Outlook

The European Central Bank’s meeting on Thursday is crucial for the Euro. With Eurozone inflation cooling down from its late 2024 peak, the ECB may adopt a more cautious or dovish stance. This divergence—between a potentially hawkish Fed and a dovish ECB—strongly supports a lower EUR/USD. For derivative traders, the busy calendar this week indicates increased implied volatility. Options strategies could be beneficial, with puts on EUR/USD being appealing for positioning a break below 1.1830 support. If the direction is unclear but a large move is anticipated after the NFP report, a long straddle could also be a good option. This Friday’s US Nonfarm Payrolls report will be vital in shaping the Fed’s direction. The US job market showed resilience throughout 2025, regularly surpassing forecasts and maintaining wage growth. Another strong jobs report would support the Warsh nomination and likely lead to a steep decline in EUR/USD. The technical outlook leans bearish as the pair struggles to rise above 1.1900. If the forthcoming US data is robust, we may see a significant break of the crucial support level around 1.1830. A failure to maintain this level could result in a drop toward the next major target at 1.1770. Create your live VT Markets account and start trading now.

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