Title: EUR/USD Advances Toward 1.1620 as Weak U.S. PMI Data Strengthens Fed Rate Cut Outlook
Original Author: Skerdian Meta, FX Leaders
Publication Date: December 2, 2025
The EUR/USD currency pair showed significant upward momentum on Monday, climbing closer to the 1.1620 level. This move came as disappointing U.S. economic data, particularly the weaker-than-expected ISM Manufacturing Purchasing Managers’ Index (PMI), sparked renewed speculation that the Federal Reserve will lower interest rates sooner than previously anticipated.
The combination of a softening U.S. economy and growing investor expectations of monetary easing has weakened the U.S. dollar, allowing the euro to regain some ground. As the markets continue to focus on the Federal Reserve’s next moves, traders are now reassessing the monetary policy trajectory heading into 2026.
Below, we examine the key factors driving the EUR/USD currency pair higher and analyze the implications for both the euro and the broader forex market. We also take a look at economic indicators, market reactions, technical chart patterns, and what traders can expect moving forward. All insights are based on reporting from FX Leaders, authored by Skerdian Meta.
Recent Market Developments Supporting EUR/USD Uptrend
Disappointing U.S. PMI Weighs on the Dollar
The Institute for Supply Management (ISM) released its November Manufacturing PMI on Monday, revealing data that fell below market expectations. This came as a surprise to many investors and analysts who had forecast a moderate rebound in the manufacturing sector.
Key highlights from the ISM Manufacturing Report:
– The Manufacturing PMI dropped to 48.9 in November
– Economists had anticipated a reading of 49.7
– New Orders Index fell to 46.3, down from 49.5 in October
– Employment Index also declined to 47.1
– Prices Paid Index remained subdued, signaling continued disinflation pressures
Any reading below 50 indicates a contraction in the manufacturing sector, and the November figure represented the 13th consecutive month of contraction. The weakness in new orders and employment further underscored the fragile state of the industrial economy in the United States. With growth prospects dimming, the dollar faced added pressure.
Fed Rate Cut Expectations Intensify
The weak ISM data added to the growing body of evidence suggesting that the U.S. economy may be slowing more sharply than anticipated. As a result, traders began recalibrating their expectations for monetary policy, pushing yields lower and reducing demand for the greenback.
Market reactions include:
– U.S. Treasury yields fell sharply across the curve
– The 10-year yield dropped to 4.10 percent, down from its recent highs near 4.50 percent
– Fed Funds Futures saw increased pricing for a rate cut as early as March 2026
– CME FedWatch Tool indicated over 60 percent probability for a rate cut by the March FOMC meeting
These moves reflect growing confidence among traders that inflationary pressures are abating, giving the Federal Reserve more flexibility to support growth and stabilize jobs through a reduction in rates.
Euro Benefits from Dollar Weakness and Stable Eurozone Data
While the dollar started the week on the defensive, the euro enjoyed increased buying interest after recent economic indicators from the eurozone suggested more stability than previously feared.
Recent eurozone economic indicators include:
– Eurozone CPI inflation edged lower but remained close to expectations
– German retail sales showed modest growth in October
– Final Manufacturing PMI for the eurozone improved slightly to 44.6 from the preliminary reading of 43.8
– ECB officials signaled a cautious but steady stance amid rising risks abroad
Although eurozone economic activity remains subdued, the currency’s strength against the weakening dollar helped push the EUR/USD pair higher.
Technical Analysis: EUR/USD Targets 1.1620 Resistance
From a technical perspective, the EUR/USD pair continued its upward trajectory,
Read more on EUR/USD trading.