BUZZ-COMMENT-Brand new year, same old problems for EUR/USD

Jan 2 (Reuters) - EUR/USD erased gains then struck a 26-month low on the first trading session of 2025 as apparent economic divergences between the U.S., euro zone and China appear set to plague the euro in the New Year.

The latest data indicates China's economic growth, which the euro zone is dependent on, remains in the doldrums.

December Caixin manufacturing PMI indicated factory activity grew slower than expected. The PMI neared contraction territory as it dropped to 50.5 from 51.5 in November and was below estimates of 51.7.

Euro zone factory activity contracted more than expected. December HCOB manufacturing PMI dropped to 45.1 against estimates of 45.2 and from 45.2 in December.

Meanwhile U.S. weekly and continuing claims fell from the prior week and were below analysts estimates to indicate the U.S. jobs market remains healthy.

The diverging economic paths could widen the gap between Fed and ECB policy.

The Fed may be reluctant to cut again should jobs remain robust and inflation tick higher while the ECB may have to accelerate easing to spur economic growth.

The data could keep the dollar's yield advantage over the euro in place as Fed SRAM26 and ECB FEIZ2 terminal rate spreads and German-U.S. yield spreads US2DE2=RR may widen.

U.S. December ISM manufacturing and services PMIs as well as the December payrolls report may send EUR/USD lower should they indicate the U.S. economy remains on solid footing.

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(Christopher Romano is a Reuters market analyst. The views expressed are his own)

((christopher.romano@thomsonreuters.com;))