Insights 
VT 
The EUR/USD pair rose by 0.15% to remain above 1.1600 as the US dollar weakened. This movement followed hawkish comments by the Bank of Japan’s Governor Ueda and a deceleration of US manufacturing activity.
The US PMI showed a decline, with employment in the manufacturing sector falling, partly attributed to tariffs. Speculation about changes in US economic policy leadership further weakened the dollar.
European Manufacturing Data
In Europe, mixed results came from HCOB Manufacturing PMIs, with Germany and the Eurozone missing targets. Economic data’s impact on EUR/USD remains minimal, with attention on potential peace talks between Ukraine and Russia.
US and EU economic outlooks will focus on upcoming data, such as the EU’s HICP and US’s employment and inflation indicators. The EUR/USD remains near the confluence of the 50- and 100-day SMAs, with technical indicators suggesting potential short-term sideways movement.
The Euro is the currency used by 20 EU countries and accounts for 31% of global foreign exchange transactions. The ECB plays a role in managing the currency’s value by setting interest rates. Inflation data, alongside economic indicators like GDP and trade balance, influence the Euro’s exchange rate.
The US Dollar is showing weakness, which creates opportunities for us. Markets are pricing in an 87% chance that the Federal Reserve will cut interest rates later this month, a move supported by recent data. We’ve seen slowing economic growth, with last quarter’s GDP revised down to just 0.8%, and inflation continuing its cooling trend.
US and European Monetary Policies
In Europe, the situation is different, with the European Central Bank likely to hold interest rates steady for now. Recent inflation data from last week showed the Harmonized Index of Consumer Prices (HICP) at 2.5%, still stubbornly above the 2% target. This policy divergence between an expected Fed cut and a steady ECB should continue to support the Euro against the Dollar.
Given this outlook, we should consider positioning for further EUR/USD strength into the end of the year. Buying call options on the EUR/USD with January 2026 expiry could be a prudent way to play this expected move. This strategy allows us to profit from a rise above 1.1600 while capping our potential downside.
We must watch the upcoming US Core PCE inflation and jobs data this week, as any surprisingly strong numbers could challenge the rate cut narrative and cause a sharp reversal. Geopolitical developments are also a factor, as any setback in the Ukraine-Russia peace talks could quickly sour sentiment toward the Euro. The mixed manufacturing numbers from Germany, which showed a renewed drop in new orders in November 2025, also remind us that the Eurozone’s economic footing isn’t entirely solid.
Technically, the pair is consolidating near the 1.1600 level, capped by key moving averages around 1.1642. A decisive break above this resistance would open the door to a test of 1.1700. On the downside, a drop below the 20-day moving average at 1.1571 would signal that the bullish momentum is fading.
