Euro stays under pressure as lacklustre PMIs weigh; struggles near 1.1200 against recovering USD

• A combination of headwinds sends EUR/USD lower for a second consecutive day.
• Largely disappointing Eurozone PMIs weigh on the Euro as concerns persist over France’s debt.
• The USD gains support from Fed rate-rise expectations and geopolitical risks, adding to pressure on spot prices.

Largely disappointing Eurozone PMIs have prompted renewed selling in EUR/USD, leaving the pair lower for a second consecutive day. During the first half of Friday’s European session, it trades around 1.1200, towards the bottom of its weekly range.

October’s preliminary HCOB Composite PMI fell to 51.9 from 53.1 the month before, indicating slower growth in Eurozone private-sector business activity. The figures add to signs of easing growth in Germany, the Eurozone’s largest economy, and an unexpected decline in private-sector activity in France. France’s deep sovereign debt and political crisis also continues to weigh on the single currency. Together with renewed buying of the US Dollar (USD), these developments are putting some downward pressure on EUR/USD.

Despite recent signals from Federal Reserve (Fed) officials that interest rates need not rise urgently, traders continue to price in roughly an 80% probability of another increase in borrowing costs in December, given oil-driven inflation risks. Meanwhile, a further escalation of Middle East tensions is sustaining geopolitical uncertainty and supporting safe-haven demand for the Greenback. The currency has consequently recovered modestly from the three-week low reached on Thursday. This is also keeping EUR/USD under selling pressure as attention turns to next week’s key central bank event.

Next Wednesday, the Fed will deliver its decision following a two-day meeting. With no updated economic projections due, traders will examine the accompanying policy statement and remarks from Fed Chair Kevin Warsh at the post-meeting press conference. The advance estimate of US Q3 GDP and the US Personal Consumption Expenditures (PCE) Price Index, both due next Thursday, will also drive movements in the USD and EUR/USD.