**EUR/USD Price Forecast: Euro Weakens Toward 1.17 as Eurozone PMI Disappoints and USD Strength Builds**
*Original article by TradingNews.com*
*Rewritten and expanded to 1000+ words, credit to TradingNews.com and original author*
The EUR/USD currency pair has come under significant pressure this week, moving closer to the 1.1700 handle amid disappointing Eurozone economic data and continued strength in the US dollar. Investors are closely watching several macroeconomic indicators and central bank policies that are influencing the near-term and long-term trajectory of the world’s most traded currency pair.
In this forecast, we break down the key drivers that have contributed to the euro’s recent weakness and look at what market participants should expect in the coming days and weeks.
## Key Takeaways
– EUR/USD is on a downward trajectory, approaching the 1.1700 level.
– Weak Eurozone PMI data has eroded confidence in the bloc’s economic growth prospects.
– The US dollar has benefited from safe haven flows and stronger-than-expected data.
– Central bank divergence continues to support USD strength over the euro.
– Technical indicators suggest potential downside risk for EUR/USD in the short term.
## Euro Weakens on Disappointing Eurozone PMI Data
One of the most important recent catalysts for movement in EUR/USD has been the release of Purchasing Managers’ Index (PMI) data for the Eurozone. Flash data revealed a sharper-than-expected slowdown in business activity during the latest survey period, raising new concerns about the bloc’s economic trajectory.
– The Services PMI fell to 50.5, barely in expansion territory and below consensus expectations.
– The Manufacturing PMI printed at 45.1, signaling a continued contraction in industrial activity.
– Composite PMI clocked in at 48.9, well below the important 50.0 threshold that separates expansion from contraction.
These numbers provide an early indication that the Eurozone’s post-pandemic recovery may be faltering before fully taking hold. Sluggish demand, labor shortages, and persistent supply chain issues continue to weigh on both manufacturing and services sectors.
Germany, the Eurozone’s largest economy, posted one of the weakest PMI readings, adding to fears of stagflation—a toxic economic mix of slow growth and high inflation. This backdrop has generated skepticism about the European Central Bank’s ability to normalize monetary policy in the months ahead.
## Market Reaction and Investor Sentiment
Following the release of the PMI data, the euro depreciated significantly against most of its peers, with EUR/USD experiencing increased selling pressure. The currency pair fell from the 1.1800s to the low 1.1700s, continuing the bearish pattern that has been in place since mid-June.
Investor sentiment is becoming increasingly cautious toward euro-denominated assets. Bond yields in the Eurozone have pulled back, and expectations for ECB rate hikes in the future are being re-evaluated.
Financial institutions across the globe are revising Eurozone GDP forecasts downward, in response to the weak PMI data. With the region’s recovery narrative hanging in the balance, investors are swiftly rotating back into US dollar-dominated assets.
## US Dollar Regains Dominance
While the euro contends with tepid data and sluggish market sentiment, the US dollar has been gaining strength driven by a combination of factors. The greenback’s resurgence is playing a central role in driving EUR/USD toward lower levels.
Several dynamics are supporting recent USD strength:
– Improved US economic data indicating robust post-pandemic recovery, particularly in the labor market and retail sector.
– Federal Reserve officials signaling openness to monetary tightening, including the tapering of asset purchases and eventual rate hikes.
– Increased demand for safe-haven currencies amid rising concerns about global growth, Delta variant contagion, and geopolitical tensions.
– A narrowing yield differential favoring US Treasuries over Eurozone sovereign bonds, attracting fresh capital inflows into dollar-based assets.
From a macro perspective,
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