The Euro (EUR) remained under pressure against the US Dollar (USD) on Friday, even as the Greenback traded broadly flat. Traders weighed a fresh batch of US economic data alongside rising expectations for a potential Federal Reserve (Fed) rate cut in December.
At the time of writing, EUR/USD trades near 1.1500 and is poised to post its first weekly loss after two straight weeks of gains. The US Dollar Index (DXY) holds near 100.26, hovering around its highest level in more than five months.
Strong US PMIs Reinforce Solid Economic Momentum
S&P Global’s preliminary US PMI data signaled another month of firm economic activity in November.
The Composite PMI edged up to 54.8 from 54.6, marking a four-month high.
The Services PMI rose to 55.0 from 54.8, beating expectations, while the Manufacturing PMI eased to 51.9 from 52.5, missing forecasts but still showing ongoing expansion.
The survey pointed to the strongest rise in new orders this year, improving business confidence, and steady job creation. However, input prices accelerated at one of the fastest paces in three years, highlighting lingering inflation pressures.
Consumer Sentiment Improves, Inflation Expectations Ease
The University of Michigan’s latest survey painted a modestly brighter picture for US consumers.
The Consumer Expectations Index rose to 51.0, exceeding both the prior reading and forecasts, while the Consumer Sentiment Index improved to 51.0 from 50.5.
Inflation expectations moved lower, with the 1-year outlook slipping to 4.5% from 4.7% and the 5-year measure easing to 3.4% from 3.6%.
Fed Cut Bets Surge After Dovish Williams Remarks
Rate-cut expectations surged after New York Fed President John Williams indicated that a near-term policy adjustment is still possible.
Williams noted that progress on inflation has “stalled,” though he still expects inflation to return to 2% by 2027. He added that economic activity has cooled and the labour market continues to ease gradually.
According to the CME FedWatch Tool, markets now assign nearly a 74% probability to a 25-basis-point cut in December – a sharp jump from around 31% earlier in the day.
Eurozone PMIs Point to Softer Economic Momentum
Across the Eurozone, preliminary PMI data painted a more subdued picture.
The HCOB Composite PMI slipped to 52.4 from 52.5, missing expectations.
Services activity strengthened, with the Services PMI climbing to an 18-month high at 53.1, but this was offset by renewed weakness in manufacturing. The Manufacturing PMI fell back into contraction at 49.7, below the consensus forecast of 50.2.
Germany remained the main drag, with both services and manufacturing activity slowing, while France showed tentative signs of stabilization as its services sector returned to growth.
