Euro holds $1.05 between eurozone data and Fed decision

The euro remained around $1.05, near the two-year low of $1.04 reached in late November, as traders assessed the economic, political, and monetary outlook for the Eurozone.

Euro holds $1.05 between eurozone data and Fed decision

Flash PMIs indicated a slower contraction in private sector activity, driven by a rebound in services, while manufacturing remained weak. However, the Eurozone’s largest economies, Germany and France, continued to underperform. Political uncertainty also weighed on the euro, as German Chancellor lost a confidence vote in Parliament as expected, paving the way for snap elections early next year. In France, the new government faces challenges in passing the 2025 budget.

Fed expected to cut rates by 25 basis points

On the monetary front, the Federal Reserve is expected to cut rates by 25 basis points this week and signal a slower pace of reductions in 2025. Meanwhile, the European Central Bank (ECB) made its fourth 25bps rate cut last week, maintaining a cautious approach toward further easing. However, many analysts believe the ECB may need to accelerate policy loosening to support the fragile Eurozone economy.