The EUR/USD fell by more than 0.28% on Tuesday, despite mixed economic data from the United States, as Federal Reserve officials provided neutral to dovish remarks. Meanwhile, data in the Eurozone indicates a slowdown in economic activity within the bloc. The pair is currently trading at 1.1690, following a peak of 1.1742.
EUR/USD declines by more than 0.28% as the Eurozone services PMIs indicate a slowdown in economic momentum. German inflation has fallen below 2%, strengthening the view that the ECB’s easing measures are mostly finished. Market participants are closely monitoring the upcoming EU inflation figures along with significant US reports such as ADP, ISM Services, and JOLTS.
> The Euro declines due to disappointing data; diminishing geopolitical risks counterbalance the mixed economic figures from the US and the dovish stance of the Federal Reserve: The US Dollar is reducing some of the losses incurred on Monday. Market participants appeared unfazed by geopolitical risks following the US’s capture of Venezuelan President Nicolas Maduro over the weekend. The ongoing stagnation of peace negotiations aimed at resolving the Ukraine-Russia conflict continues to exert pressure on the shared currency. In the US, the Purchasing Managers’ Indices showed a decline in December relative to the prior month. Meanwhile, Fed Governor Stephen Miran maintained a dovish stance as anticipated, while Richmond Fed President Thomas Barkin is adopting a neutral-hawkish position, recognizing that policy is currently within neutral territory. In Europe, PMIs indicated a deceleration in activity within the services sector. Inflation in Germany, the largest economy in Europe, has fallen below the European Central Bank’s 2% target, indicating that the ECB has reached a conclusion, provided that economic growth remains intact. Upcoming, the economic schedule for the EU will include the Harmonized Index of Consumer Prices for December, as well as inflation data for Italy and Retail Sales figures from Germany. Traders in the US market will concentrate on the ADP Employment Change figures, the ISM Services PMI, the JOLTS Job Openings, and speeches from Federal Reserve officials.
Latest FX Rate Trends: Euro faces pressure from decline in German inflation
- December’s S&P Global Services PMI indicated a decline in business activity momentum within the US. The index declined from 54.1 to 52.5, and the Composite PMI fell to 52.7 from 54.2.
- Chris Williamson remarked that “Business activity continued to expand in December, rounding off another quarter of robust growth, but the resilience of the US economy is showing signs of cracking.”
- Federal Reserve officials have made their statements public. Thomas Barkin from Richmond indicated that upcoming rate decisions will require careful calibration, referencing the conflicting risks associated with the labor market and inflation. He noted that the existing policy rate is positioned within the neutral range and emphasized the necessity of observing both aspects of the Fed’s dual mandate.
- Previously, Stephen Miran conveyed a cautious perspective, indicating that the central bank may consider lowering rates as new data suggests a necessity for easing. Miran noted that circumstances might justify as much as 100 basis points of rate reductions in 2026.
- The US Dollar Index, which measures the dollar’s value against six other currencies, recorded an increase of 0.25% at 98.61; however, it did not prevent gains in Gold.
- The Eurozone HCOB Services Purchasing Managers Index decreased to 52.4 in December, a decline from the preliminary reading of 52.6 and down from 53.1 in November.
- The Harmonized Index of Consumer Prices indicates that German inflation has decreased from 2.6% to 2% year-over-year.