**EUR/USD Price Forecast: Euro Slides Toward 1.17 as PMI Weighs, Dollar Holds Firm**
*By TradingNews.com – Original article by the Trading News Team*
In recent forex market action, the euro has come under increasing pressure, driving the EUR/USD pair closer to the critical 1.1700 support level. The latest downturn in the euro’s value coincides with disappointing European macroeconomic data, primarily from the Purchasing Managers’ Index (PMI) readings, while the US dollar has remained resilient on the back of stronger fundamentals and rising demand for safe-haven assets. This comprehensive forecast explores the key factors behind the current slide, potential implications for traders, and technical levels to watch.
### European Economic Concerns Deepen on Poor PMI Data
The latest round of PMI data from the eurozone has delivered a blow to investor sentiment. Figures for both the manufacturing and services sectors fell short of expectations, fueling concerns about the region’s economic momentum as it struggles to maintain recovery in the face of rising inflation, supply-chain challenges, and geopolitical uncertainty.
– The eurozone composite PMI slipped to a preliminary reading of 50.9, down from 52.8 in the previous month.
– The services PMI declined to 51.1 from 53.4.
– Manufacturing PMI dropped more significantly to 49.8 from 51.0, signaling a contraction.
A PMI reading below the 50 threshold indicates contraction, and while the composite remains just above that level, the trend points toward deceleration in economic growth. This weak data has triggered a bearish response in the euro as traders adjust their outlook for European Central Bank (ECB) policy tightening and macroeconomic performance.
### ECB Policy Path Now Clouded
The European Central Bank’s path to policy normalization has been further complicated by the weak PMI data. The ECB had previously signaled intent to raise interest rates in a bid to combat inflation, which remains well above its 2 percent target. However, softer economic data could prompt the central bank to adopt a more cautious approach.
– Inflation in the eurozone remains elevated, with recent eurostat data showing headline inflation at 6.1 percent year-over-year.
– Core inflation remains sticky, driven by services and energy costs.
– ECB President Christine Lagarde recently stated that future decisions would be data-dependent, emphasizing flexibility.
With growth faltering and inflation persistent, the ECB finds itself in a difficult position. Any signals that the central bank may delay or soften tightening plans could increase downside risk for the euro, making the EUR/USD pair vulnerable to further pullbacks.
### Dollar Supported by Resilient US Data
While the euro suffers from poor macroeconomic indicators, the US dollar continues to benefit from relatively stronger domestic data and global risk aversion. The greenback’s resilience contrasts sharply with the euro’s fragility, driven by several key themes:
– US PMI data remained more robust, with the composite reading around 53.2, suggesting ongoing expansion.
– Labor market conditions in the US remain healthy, with jobless claims, payroll growth, and unemployment data supporting the notion of a stable recovery.
– Consumer spending has shown resilience, albeit with some moderation due to inflationary pressures.
Moreover, the Federal Reserve’s commitment to a hawkish monetary policy path has further bolstered the dollar. Comments from Fed officials in recent weeks continue to highlight the need for sustained rate increases to return inflation to target.
### Federal Reserve Poised to Maintain Hawkish Stance
Any comparison between central banks must account for divergent policy trajectories. The Fed appears more comfortable with aggressive tightening, especially given the nation’s steadier economic backdrop. Market participants expect the US central bank to maintain a pace of 25 to 50 basis point hikes in upcoming meetings.
– The Fed’s target rate is currently in a range of 5.00 to 5.25 percent.
– Futures markets continue to price in a high probability for one to two additional rate hikes by year-end.
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