EUR/USD back on track after a nightmarish March
The euro is finally breathing a sigh of relief. After a month of March that will be remembered as the single currency's worst monthly performance since July 2025 (-2.2% against the greenback), EUR/USD is back above 1.17 - buoyed by a eurozone manufacturing PMI that has just surprised everyone. 🚀
🔍 What's going on?
The S&P Global manufacturing PMI for the eurozone came in at 51.6 in March, compared with 50.8 in February and a flash estimate of 51.4. This is the highest level in almost four years, and above all the third consecutive month above the 50 threshold that separates expansion and contraction. In concrete terms, European industry is turning, and turning better than analysts anticipated.
On the currency front, EUR/USD is trading this morning at around 1.1747, up around 0.48% on the session according to Yahoo Finance data. Nothing spectacular in absolute terms, but after the lows of 1.1417 reached in mid-March, the rebound is starting to take shape. The pair is back in a zone it hasn't seen since early April.
The detail that stings: this rebound is taking place in a context where nobody should be comfortable. The war in the Middle East continues to partially block the Strait of Hormuz, input costs for European manufacturers have just climbed to a 41-month high, and the ECB is now expected to raise rates twice in 2026 - whereas at the start of the year, the market was betting on the status quo or even a cut. Strangely enough, it's precisely this prospect of rate hikes that is supporting the euro.
💡 Why does it matter?
Because this PMI at 51.6 tells a story that few saw coming: European industry is weathering the geopolitical shock without collapsing. Germany, which we were still burying six months ago, signs its best reading in 46 months. Italy in 37 months. Even order books are rising for the first time since mid-2022. It's not fireworks, but it's a real inflection.
For a forex trader, it changes the reading of the case. As long as the rate differential between the Fed and the ECB worked against the euro, the dollar had every argument. But if the ECB has to raise rates to counter inflation imported by soaring oil prices, and European macroeconomic conditions don't collapse, then the "strong dollar against a backdrop of divergence" narrative begins to crack. The current rebound may not just be a month-end technical move.
Watch out for confirmation (or breakage) of the scenario: next week's HICP inflation figures and the next ECB meeting. If inflation refuses to slow down and Lagarde stays on her hard line, 1.18 could quickly come back into focus.
📊 Our opinion
Frankly, we find this rebound interesting - but let's not kid ourselves. Resistance around 1.18 remains solid, and as long as the Strait of Hormuz is under tension, the slightest tweet or strike can turn the table in two hours. Long bias on the euro is playable, but with tight stops and zero romanticism.
What seems more solid to us is the background reading. The eurozone is no longer the terminal patient everyone was describing at the end of 2025. The PMI reading of 51.6 validates what we've already been seeing on the Eurostoxx indices for the past few weeks: institutional money is starting to return to European assets. For medium-term portfolio positions, this is a signal that cannot be ignored.
A little reminder though: business confidence, for its part, has fallen to a five-month low. All is not rosy. But in trading, you rarely take a position on the perfect - you take a position on the least worse than what the market was predicting.
✅ To remember
Eurozone manufacturing PMI: 51.6 in March, highest in almost 4 years (vs. 50.8 in February)
EUR/USD: around 1.1747, +0.48% on the session
March 2026 was the worst month for the euro since July 2025 (-2.2%)
Market now anticipates 2 ECB rate hikes in 2026
Key risk: Strait of Hormuz and imported inflation via oil
Levels to watch: resistance 1.18, support 1.1450
What are you playing on this rebound? Do you believe in a real trend reversal for the euro, or is it just a warm-up before a return below 1.15?
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