EURUSD gained as much as 0.3% after the release of PMI data, rebounding from key support around 1.163. The pair therefore remains within the consolidation that has persisted since early August, showing resilience to mixed signals from the Fed and rapidly evolving market expectations regarding U.S. monetary policy.
PMI data helped EURUSD defend the 1.165 level, slightly below the midpoint of the current consolidation. Following the rebound, the pair is trading in a narrow range between the 30- and 100-period exponential moving averages on the H4 chart. RSI is neutral around the 50 level. Source: xStation5
What is shaping EURUSD today?
- PMI reports for the euro area’s largest economies indicated an unexpected acceleration in private sector activity, particularly in manufacturing. The slump in French industry eased (49.9) after months of readings well below 50, while German manufacturing recorded its strongest production growth in over three years.
- The European recovery justifies the ECB’s current pause in rate cuts, announced after its latest decision. According to President Christine Lagarde, the current 2–2.15% range is adequate given inflation being on target and visible signs of improving economic momentum. This tempers market expectations that the ECB may be forced to cut rates below 2% due to the risk of stagnation from Donald Trump’s tariffs.
- However, tomorrow’s speech by Fed Chair Jerome Powell at Jackson Hole could break the consolidation. A hawkish stance on recent inflation data and/or downplaying the record NFP revisions could push EURUSD back below 1.163. Conversely, even the absence of major shifts in the Fed’s narrative may encourage buyers to position for further U.S. rate cuts.
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