EUR/USD is poised to end the week with losses of 0.21% but remains above 1.16 for a third straight day, capped by key resistance levels after US data may not dissuade the Fed from tapering rates.
Euro supported by positive PMIs; Moody’s warning against France limits upward momentum
US inflation data would not move the needle in favor Fed hawks, missing downside estimates, though it remains far from the central bank’s 2% target. Then S&P Global showed the economy showing signs of strength as manufacturing and services PMIs rose sharply in October.
Meanwhile, the University of Michigan (UoM) took a bet on the day amid the US government shutdown, now in its 24th day, revealing US consumers are slightly pessimistic while estimating prices could continue to rise.
Recently, the dollar pared some of its gains as the Trump administration launched a trade investigation into whether China complied with a limited trade deal reached in 20202 during President Donald Trump’s first term, Bloomberg reported.
In Europe, the HCOB Flash Purchasing Managers Index (PMI) improved in October from 49.8 to 50 and from 51.3 to 52.6. Both prints beat forecasts, suggesting business activity is picking up with a jump in demand.
At the time of writing, Moody’s Ratings changed France’s outlook to negative, affirming the aa3 rating, citing “France’s political instability threatens to limit the ability to address key political challenges such as an increased fiscal deficit, rising debt burden.”
Daily Market Moves: EUR/USD Holds Firm Despite Solid US PMI Data
- The US dollar index ( DXY ), which tracks the greenback’s performance against a basket of peers, rose 0.03% to 98.94, bucking EUR/USD’s gradual gains.
- The US consumer price index (CPI) rose 3.0% in the 12 months to September, just below forecasts of 3.1% and slightly higher than August’s 2.9%. Core CPI – which excludes food and energy – rose 3.0% year-on-year, down a tenth from the previous month.
- U.S. business activity accelerated in October, posting the second-fastest pace so far this year, according to preliminary “flash” PMI data from S&P Global. The report also highlighted the strongest-ever increase in new business seen 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, signaling continued expansion in the sector. The services PMI rose to 55.2 from 54.2, marking a three-month high and underscoring solid momentum in business activity.
- The University of Michigan consumer sentiment index was revised down to 53.6 in October from a preliminary reading of 55.0, missing expectations of 55.1. One-year inflation expectations fell slightly to 4.6% from 4.7% in September, while the five-year outlook rose slightly to 3.9% from 3.7%.
- The US central bank is expected to cut rates by 25 basis points to a range of 3.75%-4%, with traders already pricing in another 0.25% cut for the December meeting.
Technical outlook: EUR/USD consolidating but slightly bullish
EUR/USD technical view improved slightly but remains neutral as the pair trades 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 fallen below the neutral 50 level, indicating increasing bearish momentum.
Immediate support is seen at 1.1600, followed by 1.1550 and 1.1500. A clear break below this zone would reveal the August 1 cycle low around 1.1391. On the upside, resistance remains in line with the 20- and 100-day SMAs, while a decisive move above 1.1700 would open the way to 1.1800 and the July 1 high at 1.1830.
Euro frequently asked questions
The euro is the currency for the 19 countries of the European Union 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 over $2.2 trillion per day. EUR/USD is the most traded currency pair in the world and represents an estimated 30% discount on all trades, 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 ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is raising or lowering interest rates. Relatively high interest rates – or expectations of higher rates – usually benefit the euro and vice versa. The Governing Council of the ECB takes decisions on monetary policy at meetings held eight times a year. Decisions are made by the heads of the national banks of the eurozone and six permanent members, including ECB President Christine Lagarde.
Eurozone inflation data, as measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric indicator for the euro. If inflation rises more than expected, especially if it is above the ECB’s 2% target, it obligates the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its peers will usually benefit the euro, making the region more attractive as a place for global investors to park their money.
The published data assesses the health of the economy and may have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the euro. Not only will this attract more foreign investment, but it may encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if the economic data is weak, the euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are particularly significant 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 on exports and what it spends on imports for a given period. If a country produces a highly sought-after export, then its currency will gain in value purely due to the extraordinary demand created by foreign buyers who want to buy those goods. Therefore, a positive net trade balance strengthens the currency and vice versa a negative balance.
