The EURUSD pair extended its decline on Wednesday, slipping to around 1.1620 as investors gravitated toward safe-haven assets, including the US Dollar and Gold. Renewed concerns over rising fiscal deficits in major economies triggered a global bond sell-off, adding pressure on the common currency.
France led the charge in bond market volatility, with its long-term yields jumping to 4.50%, the highest level since the 2009 financial crisis. Similarly, German 30-year yields gained another 10 basis points over three days, signaling growing unease among investors about Eurozone fiscal health and political stability.
Dollar Holds Strong Despite Weak Data
The US Dollar Index (DXY) remained firm, benefiting from risk aversion even after disappointing ISM Manufacturing PMI data. The index, which came in at 48.7, marked the sixth straight month of contraction, below the expected 49.0 reading.
Despite the weak data, the greenback held its ground as investors prioritized safety over growth prospects. The resilience of the Dollar highlights its dominant role as a safe-haven currency during times of financial uncertainty.
Mixed Manufacturing Signals
While the ISM data disappointed, the S&P Global Manufacturing PMI offered a slightly brighter outlook, showing a reading of 53 just a notch below July’s 53.3. However, the report flagged ongoing pricing pressures and supply chain disruptions linked to US President Donald Trump’s tariff policies, raising concerns about potential headwinds for industrial output in the coming months.
Upcoming Eurozone and US Data
Market participants are closely watching upcoming releases that could influence short-term price action:
Eurozone HCOB Services PMI: Expected to confirm a 50.7 reading for August, signaling modest growth but a slowdown from July’s 51 four-month high.
US Factory Orders: July orders are projected to have contracted by 1.4%, extending June’s sharp 4.8% drop, reflecting the drag of tariff-related disruptions.
JOLTS Job Openings: Anticipated to remain steady at 7.4 million, this labor market indicator will set the tone for Friday’s non-farm payrolls report, which traders view as a key gauge of economic resilience.
Market Sentiment and Risk Outlook
Although risk aversion has slightly eased, the overall sentiment remains fragile. Fiscal instability in the Eurozone and concerns about slowing global growth are keeping traders cautious. Any worsening in Eurozone PMI figures or unexpectedly weak US data could heighten volatility in the currency markets.
For now, traders are positioning defensively, with EURUSD facing resistance near 1.1650 and support levels around 1.1580. A clear breakout in either direction could define the next major move for the pair.
Conclusion
The Euro remains on the back foot amid a perfect storm of Eurozone debt jitters, political uncertainty, and safe-haven demand for the US Dollar. While near-term data could offer some support, sustained pressure from fiscal fears and tariff-related headwinds could keep the EURUSD pair under bearish pressure in the sessions ahead.
