Where we are: EUR/USD is trading at 1.1391, down 0.35% on the day and marking a fresh low since mid-2025. The pair has been under consistent selling pressure through the Asian and early European sessions, failing to find any meaningful bids above the 1.14 handle. We are currently trading below the prior New York close, with immediate resistance seen at the 1.1420 area.
What’s driving it: The Euro is caught between a tightening ECB stance and increasingly concerning domestic economic signals. While the ECB hiked in June and maintains a hawkish bias, recent inflation prints and the market pricing in ~50% odds of a September hike are being overshadowed by a deteriorating growth outlook. Today’s flash PMIs for France and Germany are expected to show continued contraction in manufacturing and a slowdown in services, which will likely reinforce the narrative that the ECB may be nearing the end of its hiking cycle, especially if energy prices stabilize. This domestic weakness is amplifying the impact of a firmer US Dollar, evidenced by the DXY’s rise to 101.28 and higher US yields.
- ECB’s Philip Lane’s introductory remarks this morning offer little new direction, but the underlying message remains one of vigilance on inflation, with HICP at 3.2% and core at 2.5%.
- Today’s Eurozone flash PMI data, particularly for Germany, is critical. Forecasts point to continued manufacturing contraction and services slowing, which will test the market’s conviction in further ECB tightening.
- Speculator positioning shows net non-commercials are modestly long EUR at +34,353 contracts, but this is only the 17th percentile over 52 weeks, suggesting limited scope for a significant squeeze on the downside without a major catalyst.
NY session focus: The key event risk for EUR/USD in the New York session is the release of the US Flash Manufacturing and Services PMI at 09:45 ET. Given the current EUR weakness and USD strength, a strong US print would likely extend the downside in EUR/USD towards the 1.1350 support level. Conversely, a weaker-than-expected US PMI could offer a temporary reprieve for the Euro, potentially pushing it back towards the 1.1420 resistance. The trade that’s working is short EUR/USD, targeting further downside. The pain trade for this asset would be a sharp reversal higher on unexpectedly weak US data, forcing shorts to cover into a thin market.