EUR/USD opened the 2025 trading year with a sharp decline, falling by 0.8% to hit 1.0250—its lowest level since November 2022, marking a nearly 26-month low. The drop followed disappointing data from the European Manufacturing Purchasing Managers Index (PMI) and dovish comments from European Central Bank (ECB) policymaker Yannis Stournaras.
Stournaras, a member of the ECB’s Governing Council, indicated that the ECB is on track to gradually lower interest rates throughout 2025. He forecasted rates would settle near 2% by the end of the year. This dovish stance, combined with the Federal Reserve’s more gradual rate cuts, is expected to significantly widen the interest rate differential between the Euro and the U.S. dollar, putting sustained downward pressure on EUR/USD. Analysts now anticipate that the Euro could reach parity with the Greenback later in the year.
Adding to the Euro’s woes, December’s pan-European PMI survey showed a slight decline, falling to 45.1 from the expected 45.2. Though the impact of the data was minimal, it underscored the growing likelihood of the ECB accelerating rate cuts to support Europe’s struggling economy. This comes amid rising petrol prices, which are at their highest in two years, further complicating the European economic outlook.
Friday’s U.S. economic data, which will feature the ISM Manufacturing PMI, is expected to show little change, holding steady at a contractionary 48.4 for December.
EUR/USD Forecast
EUR/USD has fallen 8.82% from its peak in September, dipping below 1.1200. Despite this, short-sellers have yet to break the 1.0200 barrier. A bearish divergence on the MACD indicator suggests further declines may be ahead. The pair is currently facing resistance from a descending 50-day Exponential Moving Average (EMA) around 1.0550. A rally beyond this level could face further resistance near the 200-day EMA at 1.0760.
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