Euro Slides to Lowest Level in Over Two Years – Action Forex

The euro has taken a tumble on Thursday. In the North American session, EUR/USD is currently trading at 1.0246, down 1.06% on the day. The euro has broken below the 1.03 line for the first time since Nov. 2022.

Is euro headed toward parity?

The euro fell more than 6% against the dollar in 2024 and could continue to lose ground in 2025. The Federal Reserve has said it will go slow on rate cuts, a reflection of the strong US economy and resilient labor market. The eurozone economy has been sputtering since late 2022, although the labor market has been overheating. The ECB has cut rates at three straight meetings and seems intent on continuing to lower rates in order to boost the weak economy.

The European Central Bank is expected to cut over 100 basis points this year, more than double the Federal Reserve. A wider US/Europe rate differential will make the dollar more attractive to investors. Could the euro be headed for parity in the near future?

The eurozone released manufacturing PMIs earlier today and the news remains bleak. Among the four largest economies in the eurozone, all are showing contraction in manufacturing activity except for Spain. Germany’s PMI dropped to 42.5 in December, down from 43.0 in October and November, while the eurozone PMI ticked lower to 45.1 in December from 45.2 in November. Manufacturing activity in Germany and the eurozone have been contracting for two years and there doesn’t seem to be much light at the end of tunnel for the struggling manufacturing sector.

We’ll get a look at the US ISM manufacturing PMI on Friday. Manufacturing activity has been contracting and is expected to tick lower to 48.3 in December from 48.4 in November.

EUR/USD Technical