- The euro was beaten by PMIS of the weakest than expected, despite the cautious optimism of the ECB officials.
- The US PMISs exceeded expectations, reinforcing economic resilience and raising the dollar.
- Trump’s budget exceeds the vote of the camera, further promoting USD in the middle of a fiscal impulse.
The EUR/USD collapsed below 1,1300 on Thursday, since the US economic data (USA) were better than expected compared to the figures of the preliminary purchasing managers index (PMI) of the Eurozone preliminary for May. At the time of writing, the EUR/USD is quoted at 1,1271, with a fall of 0.55%.
The US variable rental markets became slightly positive after the approval of the “One Big Beautiful Bill” by President Donald Trump in the House of Representatives. Next, the Senate will discuss and adjust the proposal for Trump’s tax and spending cuts before approving the bill.
The news promoted the dollar, which extended its appreciation against the shared currency, since the indices of purchasing managers (PMI) of the US S&P global for May exceeded the estimates, reaffirming the solidity of the economy.
Other data showed that the number of American citizens who request unemployment benefits decreased compared to the estimates and data of the previous week, a relief for the Federal Reserve (FED), which has the dual mandate of price stability and maximum employment.
The governor of the Fed, Christopher Waller, crossed the news lines and said that if the tariffs are about 10%, the economy would be in good shape for the second half of 2025. He added that in that scenario, the Fed could resume its flexibility cycle later in the year.
On the other side of the Atlantic, the preliminary PMIs of Hcob in France, Germany and the Eurozone contracted unexpectedly in May. At the same time, the IFO business climate survey of Germany improved slightly in May.
Meanwhile, some policy responsible for the European Central Bank (ECB) crossed the news lines. Yannis Stournaras questioned the security of the US dollar and created an opportunity for the euro.
The Vice President of the ECB, Luis de Guindos, said that inflation could soon return to the objective of 2% of the ECB, while economic growth weakens. Boris Vujčić of the ECB pointed out that inflation could approach the target by the end of 2025.
This week, the EU economic agenda will include GDP data in Germany and ECB speakers. The US Agenda will include data on housing and speakers of the Fed.
EUR/USD Daily Market Movements: Optimistic Economic Data from the US weigh on the euro
- The US Chamber of Representatives has approved Trump’s fiscal bill and is addressed to the US Senate of the Congress Budget (CBO), he said that the budget approval would add 3.8 billion dollars to the debt of 36.2 billion dollars in the next decade.
- The Global S&P flash manufacturing PMI rose to 52.3, from 50.2 and well above the estimation of 50.1, pointing out a stronger rebound in the manufacturing activity. The Flash Services PMI also improved, rising to 52.3 from 50.8, exceeding the forecasts and pointing to a continuous strength in the service sector.
- Initial unemployment requests in the US for the week that ended on May 17 were 227K, slightly below the 229K of the previous week and 230k expectations, reinforcing the signs of a resilient labor market.
- The euro weakened since the HCOB PMI Flash of the Eurozone in May was worse than expected, highlighting the ongoing economic slowdown. The PMI of services fell from 50.1 to 48.9, below the estimates of 50.3, and the manufacturing PMI stood at 49.4, going up from 49.0 in April, exceeding the forecasts.
- The HCOB Services PMI of Germany fell from 49.0 to 47.2, below the forecasts of an increase to 49.5. The HCOB manufacturing PMI rose to 48.8, from April 48.4, below the forecasts of an increase to 48.9.
- The IFO business climate of Germany improved from 86.9 in April to 87.5 in May. Estimates expected a reading of 87.4. The report indicated that companies are becoming less pessimistic about their perspectives. “The German economy is slowly recovering its stability,” said IFO president Clemens Fuest.
EUR/USD technical perspective: prepared to remain below 1,1300 for the rest of the day
From a technical perspective, the EUR/USD is prepared for a pause in its ongoing rebound. A graphic pattern of ‘bassist wrapping’ is coming, which could pave the way for more falls as the torque reached a minimum of two days of 1,1255.
Although the impulse remains bullish, as indicated by the relative force index (RSI), the RSI is approaching the neutral line of 50, which indicates that buyers are losing impulse.
If the EUR/USD closes below 1,1300, this could pave the way to try 1,1255. Once surpassed, the next support level would be the 1200 mark, before the single mobile average (SMA) of 50 days in 1,1138.
On the other hand, if the EUR/USD rises above 1.13, more profits are planned, the first resistance being the last maximum of the cycle in 1,1362, the Diario de Mayo Pico.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
