EUR/USD is on track to end the week with a 0.21% decline but continues to hold above the 1.16 mark for the third consecutive session. The pair remains capped by strong resistance levels as softer-than-expected US inflation data is unlikely to shift the Federal Reserve’s current policy stance toward deeper rate cuts.
Euro buoyed by upbeat PMIs, but Moody’s warning on France limits upside
US inflation data came in slightly below expectations, offering little support for Fed hawks, though price growth remains well above the central bank’s 2% target. Later, S&P Global’s preliminary October PMIs showed continued strength in the US economy, with both manufacturing and services expanding.
Meanwhile, the University of Michigan’s consumer sentiment index indicated a slight dip in confidence amid a prolonged US government shutdown, with consumers expecting price pressures to persist. The dollar pared earlier gains after Bloomberg reported that the Trump administration had launched a probe into whether China adhered to the limited trade agreement signed in 2020 during President Trump’s first term.
In Europe, October’s HCOB Flash PMIs showed notable improvement — manufacturing rose from 49.8 to 50.0, and services climbed from 51.3 to 52.6 — both surpassing forecasts and signaling a pickup in demand-driven business activity.
However, sentiment toward the euro was tempered after Moody’s revised France’s outlook to negative while affirming its Aa3 rating, citing political instability and fiscal challenges as potential headwinds to policy progress.
Daily market movers: euro steadies despite firm US PMI data
The US Dollar Index (DXY) edged 0.03% higher to 98.94, limiting EUR/USD’s upward momentum.
US Consumer Price Index (CPI) rose 3.0% year-over-year through September, just below expectations of 3.1% and up slightly from August’s 2.9%. Core CPI, excluding food and energy, also rose 3.0%, easing marginally from the prior month.
S&P Global’s flash October PMIs pointed to the second-fastest pace of US business activity this year, supported by robust new orders. The manufacturing PMI inched up to 52.2 from 52.0 in September, while the services PMI climbed to 55.2 from 54.2 — the highest level in three months, highlighting continued private-sector resilience.
The University of Michigan revised its October consumer sentiment reading down to 53.6 from the preliminary 55.0, missing expectations. Inflation expectations softened slightly for the one-year horizon (4.6% vs. 4.7% prior) but ticked higher for the five-year outlook (3.9% vs. 3.7%).
Markets broadly expect the Fed to deliver a 25-basis-point rate cut at its upcoming meeting, lowering the policy rate to the 3.75%–4.00% range, with another similar move priced in for December.
Technical outlook: EUR/USD consolidates but retains slight bullish bias
EUR/USD’s technical picture remains neutral with a modest bullish tilt as the pair hovers below the confluence of the 20-day and 100-day Simple Moving Averages (SMAs) at 1.1653 and 1.1658, respectively. The Relative Strength Index (RSI) has slipped below the 50 midpoint, hinting at softening upside momentum.
Initial support lies at 1.1600, followed by 1.1550 and 1.1500. A break below these levels could expose the August 1 cycle low near 1.1391. On the upside, resistance aligns with the 20- and 100-day SMAs, while a sustained move above 1.1700 would pave the way toward 1.1800 and the July 1 high of 1.1830.
