EUR/USD drifting after Euro PMI reports

The euro is slightly higher on Monday. In the North American session, EUR/USD is trading at 1.0500, up 0.02% at the time of writing.

Mixed PMI eurozone report

There was mixed news from Eurozone PMIs today. Manufacturing PMI was unchanged at 45.2 in December, short of the market estimate of 45.3. Manufacturing has been in contraction for some two years, with no light apparent at the end of the tunnel. German and French manufacturers have reduced their workforce and confidence remains weak. The German PMI fell to 42.5, down from 43.0 in November and below the market estimate of 43.1.

The eurozone services sector is in better shape than manufacturing and the PMI climbed into expansion territory in December with a 51.4 reading. This was up from 49.5 in November which was also the market estimate. Similarly, the German Services PMI rose to 51.0 from 49.3, which was also the market estimate.

ECB expected to continue cutting in 2025

The European Central Bank lowered its deposit rate by 25 basis points to 3% on Thursday, its fourth rate cut this year. The move was widely expected and the euro sustained only slight losses following the rate announcement. ECB President Lagarde said that the Governing Council had debated an oversized 50 basis point cut before agreeing on a modest 25-bp move and that the ECB planned to continue trimming rates in 2025.

The rate statement was dovish and omitted a previous reference to restrictive monetary policy and the ECB revised lower its forecasts for inflation and growth in 2025.

There are a host of reasons for the ECB to continue trimming rates. The eurozone economy is weak and both France and Germany are experiencing political instability. President-elect Trump takes office in January and if Trump imposes tariffs on the EU, the move could hurt eurozone growth and push inflation lower.

EUR/USD Technical

• EUR/USD is testing support at 1.0493. Below, there is support at 1.0463
• There is resistance at 1.0534 and 1.0564

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.