EUR/USD gives up initial gains and turns negative as US Dollar bounces back.

EUR/USD surrenders its initial gains and turns slightly negative from its opening rate as the US Dollar recovers strongly.
Market participants worry that potential German coalition government formation will unlikely uplift the economy.
Weak US private business activity data weighed on the US Dollar.

EUR/USD gives up its entire intraday gains after revisiting the one-month high near 1.0530 and drops to near 1.0460 in Monday’s early North American session. The major currency pair surrenders significant gains as the US Dollar (USD) bounces back, with investors looking beyond the weak United States (US) flash S&P Global PMI data for February.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rebounds to near 106.40 after posting a fresh 11-week low around 106.10 earlier in the day.

The US S&P Global PMI report showed on Friday that overall private business activity rose at a slower pace. The Composite PMI, which gauges activities in both manufacturing and the services sector, fell to 50.4, the lowest reading since September 2023.

A notable decline in the services sector activities led to a significant slowdown in the comprehensive business activity data. The Services PMI surprisingly declined to 49.7 from 52.9 in January due to political uncertainty, notably in relation to federal spending cuts and potential policy impacts on economic growth and inflation outlooks, according to the PMI report. Contrary to a decline in activities in the services sector, the Manufacturing PMI expanded at a faster-than-expected pace to 51.6.

Weak US PMI data has led to a decent increase in Federal Reserve (Fed) dovish bets. The likelihood that the Fed will cut interest rates in the June meeting has increased to 63.5%, up from almost 50% a week ago.

Meanwhile, fears of global slowdown due to US President Donald Trump’s tariff agenda have supported the US Dollar. Trump has threatened to introduce reciprocal tariffs and levies on lumber and forest products, semiconductors, pharmaceuticals, and automobiles.