EUR/USD Outlook Weakens Below 1.16 on Soft Eurozone Data

EUR/USD remains under pressure below 1.16 after weak German and French PMI data reinforced concerns about slowing eurozone growth. Germany’s economy stayed in contraction for a second straight month, with both services and manufacturing showing weakness, while rising energy and transport costs linked to Strait of Hormuz disruptions continue to fuel inflation pressures. This creates a difficult stagflation environment for the ECB, where growth is slowing, but inflation risks remain elevated.

At the same time, the U.S. dollar remains supported by hawkish Federal Reserve expectations and geopolitical uncertainty surrounding Iran. Fed minutes showed policymakers remain open to further tightening if inflation stays persistent, while strong U.S. economic data could continue to highlight the relative strength of the U.S. economy compared to Europe.

Technically, EUR/USD has turned bearish after falling under the 50 and 200-day moving averages. A sustained move below 1.1600 could expose 1.1500, while buyers would need to reclaim 1.1650 and close above 50 DMA to improve the outlook.

EUR/USD Daily Chart