BRUSSELS - The euro resumed its downward trend against the U.S. dollar this week, slipping below the 1.1850 level against the greenback — a technical benchmark watched by currency traders — as weak Eurozone economic data and muted global market conditions weighed on the single currency.
According to recent market reports, the EUR/USD exchange rate has been trading near 1.1840–1.1860 this week after losing ground from recent highs near 1.19.
Weak Eurozone Industrial Output
One key factor adding downward pressure on the euro was the release of Eurostat figures showing that Eurozone industrial production fell by 1.4% in December 2025 compared to November, a sharper monthly contraction that highlights ongoing weakness in the region’s manufacturing sector. While output remains higher on an annual basis, the monthly drop reinforces perceptions that economic momentum in the bloc is fragile.
Industrial production data is closely watched by markets because it often reflects broader trends in employment, consumer demand and business investment — areas where Europe continues to struggle relative to expectations.
Holiday-Thin Markets and Mixed Global Data
Monday’s trading session was also influenced by lower liquidity due to global holidays, including the U.S. Presidents’ Day holiday and China’s Lunar New Year, which kept many financial markets lightly traded and led to more pronounced moves on modest flows.
At the same time, relatively softer inflation readings in the U.S. have increased speculation that the Federal Reserve may ease monetary policy later this year, which under normal circumstances could weaken the dollar. However, the euro has not fully benefited from these developments as markets continue to assess the broader policy outlook.
Monetary Policy Divergence
The euro’s underperformance also reflects expectations about the divergent policy paths of central banks. While the European Central Bank is widely expected to keep policy accommodative amid cooling economic conditions and inflation near target levels, the U.S. Federal Reserve is seen by many investors as likely to maintain structural support for the dollar even if it cuts rates later in 2026.
Yield differentials between U.S. and European government bonds also continue to favor the dollar, making it more attractive for carry trade and investment flows compared with the euro.
What Comes Next?
Traders and investors will be paying close attention to upcoming economic data releases and central bank signals. Comments from officials at both the ECB and Federal Reserve, as well as further indicators such as inflation and GDP reports, could have a significant impact on the direction of the euro in the weeks ahead.
For now, the combination of a soft industrial picture in Europe, cautious global sentiment, and monetary policy uncertainty continues to keep the euro under pressure against the dollar — though the trend could shift as new data and policy decisions emerge.