The euro edged up slightly on Monday, halting a brutal three-day selloff that saw it fall 1.2%. In North America, EUR/USD was trading at 1.1066, up 0.18% from the previous day. With US markets closed for Labor Day, the dollar is unlikely to make any major moves today.
Eurozone and German manufacturing sectors continue to slump
The euro zone manufacturing PMI remained stable for the third consecutive month at 45.8 in August, slightly above the market forecast of 45.6. The 50 level separates contraction from expansion. The PMI has been in contraction since July 2022, the result of the ECB’s monetary tightening and rising energy prices due to the Russia-Ukraine war.
The Eurozone economy is showing signs of improvement, but this has not yet revitalized the manufacturing sector. Germany, the Eurozone’s largest economy, is faring even worse, with its manufacturing PMI falling from 43.2 in July to 42.4 in August. Weak manufacturing has pushed the German economy into contraction, and improving global demand has not been able to stop the bleeding, with no end in sight.
Germany faces a new test on Tuesday when retail sales figures are released after German consumers slashed spending in response to weak economic conditions. Retail sales have fallen in nine of the past 11 months, slowing economic activity.
The US is not immune to the manufacturing woes, with the ISM manufacturing PMI due to be released on Tuesday expected to show a contraction. The PMI has recorded just one month of expansion since October 2022, but the market expects the August PMI to improve to 47.5 from the previous release of 46.8.
EUR/USD Technical
Support is being offered at 1.1029 followed by 1.1011, with resistance at 1.1062 and 1.1080.
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Kenny Fisher is an experienced financial market analyst with a focus on fundamental and macroeconomic analysis, providing daily commentary covering a wide range of markets including FX, equities and commodities. His articles have appeared in leading online financial publications such as Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.
