Euro struggles near 1.1200 against a recovering USD, remaining under pressure after lacklustre PMIs

• Selling pressure weighs on EUR/USD for a second consecutive day as several adverse factors converge.
• The Euro faces pressure from largely weaker-than-expected Eurozone PMIs alongside worries over France’s debt.
• The USD gains support from geopolitical uncertainty and bets on a Fed rate hike, adding to the pressure on spot prices.

Selling pressure keeps EUR/USD close to the bottom of its weekly range, around 1.1200, in the first half of Friday’s European session. The pair faces selling for a second consecutive day following largely disappointing Eurozone PMI readings.

October’s preliminary HCOB Composite PMI dropped to 51.9 from the previous month’s 53.1, pointing to a slower expansion in Eurozone private-sector business activity. The figures follow moderating growth in Germany, the Eurozone’s largest economy, and an unexpected decline in private-sector activity in France. The shared currency also remains under pressure from France’s deep sovereign debt and political crisis. Together with renewed buying of the US Dollar (USD), these factors are weighing on EUR/USD.

Despite recent signals from Federal Reserve (Fed) officials that interest rate increases are not urgent, traders continue to price in around an 80% probability of another rise in borrowing costs in December, given oil-driven inflation risks. Meanwhile, a further escalation of tensions in the Middle East is sustaining geopolitical uncertainty and supporting safe-haven demand for the Greenback. This has helped the currency recover modestly from the three-week low reached on Thursday. With attention turning to next week’s key central bank event, these developments are adding to the selling pressure on EUR/USD.

Next Wednesday, the Fed will announce its policy decision after its two-day meeting concludes. With no updated economic projections due, attention will centre on the accompanying policy statement and remarks by Fed Chair Kevin Warsh at the post-meeting press conference. The Advance US Q3 GDP report and the US Personal Consumption Expenditures (PCE) Price Index, both scheduled for next Thursday, will also drive movements in the USD and EUR/USD.