The EUR/USD pair declined to below 1.1800, trading at around 1.1780. This movement occurred due to strong US manufacturing data and news of a US-India trade deal, which bolstered the US Dollar.
US President Donald Trump announced a tariff reduction on Indian goods from 50% to 18%. Additionally, Iran plans to begin nuclear negotiations with the US, which has helped ease regional tensions and provided further support to the US Dollar.
Us Manufacturing Index Impact
The US ISM Manufacturing Purchasing Managers’ Index rose to 52.6, its highest in over three years. However, a partial US government shutdown will delay the Nonfarm Payrolls report, though Congress has passed a bill to reopen federal agencies.
The economic calendar includes speeches from Richmond Federal Reserve President Thomas Barkin and Governor Michelle Bowman. The EUR/USD pair, dealing with a 2.5% reversal, struggles against a high of 1.1875, with support at the 1.1770 area being closely monitored.
A trade deal was also announced with China, involving purchases of US goods and reduced tariffs. The US S&P Global Manufacturing PMI rose to 52.4, further strengthening the US Dollar.
Looking back at the market dynamics of 2025, the environment was quite different, with EUR/USD trading near 1.1800. Today, we see the pair hovering around 1.0750, reflecting a significant shift in fundamental drivers over the past year. The old focus on specific trade deals has been replaced by broader concerns about economic growth.
Unlike the strong manufacturing data from that period, the latest US ISM Manufacturing PMI released on February 1, 2026, came in at a softer 50.1. This indicates that the factory sector is barely in expansion, a stark contrast to the robust 52.6 reading we saw in early 2025. This weaker data suggests the US Dollar may not find the same level of support from economic surprises that it did previously.
Central Bank Divergence Impact
The divergence in central bank policy is now a critical factor for traders. While back then we were awaiting speeches from Fed officials, the CME FedWatch Tool now shows the market is pricing in a 65% probability of a Federal Reserve interest rate cut by July 2026. The European Central Bank, however, remains cautious due to persistent wage growth, creating a potential policy clash that could favor the Euro.
The US-India trade deal mentioned in the past has since matured, with bilateral trade now exceeding $200 billion annually. However, the market’s focus has shifted from the positive impact of new tariffs reductions to ongoing negotiations about non-tariff barriers. The initial boost to the dollar from that 2025 deal is no longer a primary market driver.
For derivative traders, this environment suggests considering strategies that position for potential EUR/USD upside, given the weakening US data and dovish Fed expectations. Buying March EUR/USD call options with a strike price around 1.0850 could offer a cost-effective way to capitalize on a potential breakout. This allows for participation in gains while defining the maximum risk to the premium paid.
The technical picture has also evolved, with the key support level from 2025 around 1.1770 now a distant memory. Today, the pair is finding support near 1.0700, and a sustained break above 1.0800 could signal a shift in momentum. Traders should use volatility-based instruments, like options, to trade this potential shift, especially ahead of upcoming inflation data from both economies.
