EUR/USD recovers from the lows of 1.1710 as risk appetite strengthens, even in light of geopolitical developments related to Venezuela. Soft US manufacturing data exerts downward pressure on the US Dollar, even in light of Kashkari’s hawkish remarks. Market participants are closely monitoring upcoming Eurozone PMIs, inflation figures, and significant US reports, including NFPs, for new directional insights.
The EUR/USD made a modest recovery on Monday, bouncing off daily lows near 1.1710 and concluding the session unchanged at approximately 1.1718, as risk appetite showed signs of improvement, even amid escalating geopolitical tensions.
> Euro reduces losses as disappointing US data mitigates geopolitical concerns, Kashkari’s position : Recent geopolitical events took the world by surprise as the US military apprehended Venezuelan President Nicolas Maduro and his spouse on January 3, bringing them to face justice in the US. Maduro is confronted with allegations related to drug trafficking and connections to the Sinaloa Cartel as well as the Tren of Aragua organization. In addition to this, US economic data revealed that business manufacturing activity has contracted for the tenth consecutive month; however, it still remains above a threshold identified by the Institute for Supply Management as a baseline, suggesting that the economy may continue to grow, albeit at a sluggish rate. The data exerted downward pressure on the Greenback, which found some support from the hawkish remarks of Minneapolis Fed President Neel Kashkari, who reiterated that inflation continues to be elevated. In the Eurozone, the economic calendar was limited, but it is expected to pick up momentum on Tuesday, January 6. The HCOB Composite and Services PMIs are set to be disclosed for the bloc and various countries, accompanied by the publication of German and Eurozone inflation data. The economic calendar in the US will include the publication of the ISM Services PMI, Initial Jobless Claims for the week ending January 3, and the Nonfarm Payrolls data for December.
Latest FX Rate Trends: EUR/USD targets upward movement as US PMI shows contraction
- The US ISM Manufacturing PMI decreased to 47.9 in December 2025, falling short of the anticipated 48.4 and indicating a continued decline in factory activity. The reading indicated the tenth consecutive month in contraction, decreasing from 48.2 in November and underscoring ongoing weakness throughout the sector.
- The report indicates that the Employment Index increased to 44.9 from 44.0, yet it continues to reside in contractionary territory. The New Orders Index remained below the expansion threshold, experiencing a contraction for the fourth consecutive month, although it saw a slight increase to 47.7 from 47.4.
- Neel Kashkari, President of the Minneapolis Fed, indicated that inflation continues to be elevated, emphasizing that monetary policy is approaching a neutral stance. He characterized the labor market as a “low-hiring, low-firing” environment, indicating a situation of limited churn instead of a significant decline.
- The Eurozone HCOB Composite PMI reading for November stood at 51.9. A reading below the latter suggests a decline in economic conditions within the bloc. The most recent figure for the EU’s largest economy stood at 51.5, while the Services PMI recorded a value of 52.6.
- In November, Germany’s annual Consumer Price Index recorded a rate of 2.3%. Meanwhile, the Harmonized Index of Consumer Prices anticipated for December is projected to increase from -0.5% MoM to 0.4%. The HICP is anticipated to decrease from 2.6% to 2.2% for the 12 months leading to the December reading.
- Should the Eurozone inflation data align with the previous month’s reading or estimates, it may reinforce the European Central Bank position of maintaining interest rates at their current levels. Market expectations indicate that the ECB will maintain current rates, while traders are factoring in 4.7 basis points of potential rate increases by the end of 2026.