Euro Rides ECB Rate Cut Expectations Past Weak Manufacturing Data

The euro held near seven-week highs on Monday despite a downward revision to the Eurozone Manufacturing Purchasing Managers’ Index (PMI) for the latest month, which pointed to persistent weakness in the region’s industrial sector.

The final PMI reading was revised lower from the preliminary figure, showing that factory activity contracted more than initially estimated. The index remained below 50.0, separating growth from contraction, and highlighted challenges faced by manufacturers across both domestic and export markets.

Germans saw their manufacturing sector deteriorate at a faster pace than initially thought, while France reported a sharper decline. However, the services sector has been relatively resilient, cushioning the overall economy.

The euro’s resilience suggests that currency markets are focusing on broader policy expectations rather than recent economic prints. Investors have increasingly priced in the possibility of an ECB rate cut in coming months, with money markets implying a high probability of a move in September.