1.1200: Euro struggles nearby against recovering USD after lacklustre PMIs

• Second consecutive day of declines for EUR/USD as several headwinds weigh.
• Eurozone PMIs largely miss expectations, weighing on the Euro alongside French debt concerns.
• USD gains on Fed rate-rise expectations and geopolitical uncertainty, adding pressure to spot prices.

EUR/USD trades around 1.1200. The pair is near the bottom of its weekly range in the first half of Friday’s European session, with largely disappointing Eurozone PMIs drawing sellers for a second consecutive day.

At 51.9, down from 53.1 a month earlier, the preliminary HCOB Composite PMI points to slower expansion in Eurozone private-sector activity in October. Growth has also softened in Germany, the Eurozone’s largest economy, while France’s private sector has unexpectedly contracted. France’s severe sovereign debt and political crisis remain a drag on the single currency. Alongside renewed buying of the US Dollar (USD), these pressures weigh on EUR/USD.

Markets still price in around an 80% probability of another increase in borrowing costs in December, despite recent signals from Federal Reserve (Fed) officials that rate rises are not urgent. Oil-related inflation risks underpin those expectations. Meanwhile, further escalation in Middle East tensions sustains geopolitical uncertainty, supporting a modest rebound in the safe-haven US Dollar from Thursday’s three-week low. Together, these factors keep EUR/USD under selling pressure as attention turns to next week’s key central bank event.

Next Wednesday brings the Fed’s policy decision following its two-day meeting. With no updated economic projections, the accompanying statement and Fed Chair Kevin Warsh’s remarks at the subsequent press conference will be closely examined by traders. Next Thursday’s Advance US Q3 GDP and US Personal Consumption Expenditures (PCE) Price Index releases will also drive USD and EUR/USD moves.