Euro Stalled at $1.1652 after Six Days Rally
The euro-dollar (EURUSD) slowdown momentum at $1.165, its strongest level since mid-November, is supported by an upward revision to November’s Eurozone composite purchasing manager index.
The single euro currency gained support from diverging interest rates expectations between the European central bank (ECB) and the US Federal Reserve in coming days.
The euro to dollar exchange rate pushed to 1.1652 earlier Wednesday, held aloft by supportive developments in bond markets. Bond yields – the interest rate that government debt pays – have risen faster in the Eurozone than in the U.S. over recent days, which confers support to the euro. Euro-dollar’s test of 1.1652 delivers dollar buyers their strongest exchange rate since November 14.
On Wednesday, the euro stalled slightly in front of the mid-November high around $1.1655. The forex market has seen broader selloffs in US dollar ahead of Fed leadership change. Euro pause on its momentum after a six-day rally. With the stabilizing US two-year premium over Germany, the euro is little changed on Wednesday.
The markets anticipate 925 million euro options at $1.1625 to expire today. The eurozone reported that its October unemployment rate edged up to 6.4% from 6.3%. It has bounced between 6.2% and 6.4% since the end of Q1 24.
This is the lower end of where it has been since monetary union. Separately, the eurozone reported the preliminary aggregate November consumer price index.
With the largest four members reporting their CPI figures at the end of last week, there did not seem to be much impact from the news that the year-over-year headline rate ticked up to 2.2% from 2.1% and the core was unchanged at 2.4%.
The HCOB Eurozone Composite PMI rose to 52.8, exceeding the preliminary estimate of 52.4, marking the strongest expansion in private-sector activity since May 2023, driven largely by renewed momentum in the services sector.
Earlier this week, Eurozone inflation edged up to 2.2% in November from 2.1% in October, slightly above market forecasts. The combination of resilient economic activity and inflation near target suggests the European Central Bank is likely to hold interest rates steady through 2026.
In contrast, the Federal Reserve is expected to cut rates by 25 basis points this month, with two further reductions projected for next year, supporting the euro’s advance against the dollar.
The pound to euro exchange rate (GBP/EUR) jumps to 1.14, a 0.34% daily gain that is consistent with the uptrend that has been in place since November. Naira Value Depreciates as U.S Dollar Supply Tightens
