The US dollar gains momentum, while EUR/USD is pressured to a two-week low—Manufacturing PMI data divergence sparks interest rate cut expectations fluctuations

The uneven strength of US economic data continues to support the US dollar. On Friday during North American trading hours, EUR/USD broke below the 1.1500 level, touching a two-week low of 1.1491, down 0.20%, and ultimately traded around 1.1504. Behind this decline are expectations of rate cuts driven by dovish comments from Federal Reserve officials, as well as the attractiveness of the dollar due to the resilience of the US economy.

The US Economy Shows “Ice and Fire” Contradictions: Weak Manufacturing PMI but Strong Employment Data

The latest data presents a contradictory picture. The S&P Global Manufacturing PMI in November fell from 52.5 to 51.9, short of the expected 52, indicating a slowdown in manufacturing activity. Conversely, the Services PMI slightly rose from 54.8 to 55, surpassing expectations, showing continued resilience in the service sector.

More notably, non-farm payrolls data drew attention. The US Bureau of Labor Statistics reported an increase of 119K jobs in September, well above the expected 50K. Although the unemployment rate rose from 4.3% to 4.4%, the overall employment market still demonstrated considerable strength. However, the University of Michigan’s November Consumer Sentiment Index fell to its lowest level since 2009, dropping to 51 (though above the initial reading of 50.3), reflecting widespread consumer frustration over high prices and income prospects.

Fed Internal Doves and Hawks Confrontation: Market Repricings December Rate Cut Probabilities

Following the data release, comments from Fed officials became the market focus. New York Fed President Williams and Federal Reserve Board Member Mester signaled dovish views, suggesting that rate cuts remain possible “in the near term,” with Mester explicitly stating that if her vote were decisive, she would support a 25 basis point cut in December. These remarks directly boosted market expectations for a rate cut in December—initially only a 31% chance in the morning, rising to 71% during the trading day.

However, hawkish voices also remain influential. Dallas Fed President Logan and Boston Fed President Collins both emphasized that interest rates need to “remain unchanged for a period” to assess policy effects, with Collins even stressing that “current tightening policies are very appropriate.” This internal divergence caused short-term market volatility, benefiting the dollar—despite rising expectations for rate cuts, the dollar strengthened, reflecting investor confusion about the Fed’s future policy path.

European Central Bank Signals Patience; Eurozone Manufacturing PMI Falls into Contraction

The ECB has shown a relatively steady stance. Nagel expressed confidence in the central bank’s ability to fulfill its inflation mandate, while Vice President De Guindos sees growth risks as balanced and considers the policy rate appropriate—these comments suggest no urgent plans for adjustments. However, Eurozone data remains less optimistic: manufacturing PMI in November fell from 50 to 49.7, entering contraction territory for the first time, below the expected 50.2; meanwhile, services PMI rose slightly to 53.1, slightly above expectations.

The weakening of manufacturing PMI adds downward pressure on the euro, and with the US dollar favored due to US manufacturing resilience, EUR/USD remains under pressure.

Technical Outlook: Breakout Risks Emerge, Bears in Control

From a technical perspective, EUR/USD has been declining consecutively and is currently hovering around 1.1500. A daily close below 1.1491 would further open the downside space. Key support levels are at 1.1468 (November 5 low) and 1.1405 (200-day simple moving average).

To achieve a bullish reversal, buyers need to break above the 20-day simple moving average at 1.1566, followed by reclaiming the 1.1641 to 1.1650 zone (the intersection of the 50-day and 100-day simple moving averages), which could pave the way toward 1.1700. Currently, bearish momentum appears strong, and the stability of key supports will determine the next trend.