The Euro has started the week with a large decline. At the time of writing, EUR/USD is trading at 1.1103 in the European session, down 0.50% from the previous day. Later today, the US Services and Manufacturing PMIs are due to be released.
Eurozone and German PMIs disappoint
August’s services and manufacturing PMIs disappoint, as they slowed in September and came in below expectations.
Manufacturing remains in contraction. The euro zone manufacturing PMI fell to 44.8, below August’s 45.8 and market expectations of 45.6, the biggest drop this year. In Germany, the euro zone’s largest economy, manufacturing fell to 40.3, below August’s 42.4 and market expectations of 42.3, the lowest level in a year. The 50 line separates expansion from contraction.
The services sector appears to be improving slightly, but still slowed in September. The euro area services PMI fell to 50.5 from 52.9 in August, below market expectations of 52.1. This is the lowest since February and indicates a slight expansion. The story is similar in Germany, where the PMI came in at 50.6, below August’s 51.2 and below market expectations of 51.0.
Weak data will send the euro lower today, providing a case for an interest rate cut. The European Central Bank has reversed course and embarked on a cycle of rate cuts, first in June and then a second time earlier this month. With inflation edging closer to the ECB’s 2% inflation target, the goal is now to jumpstart a weak economy and avoid a recession.
EUR/USD Technical
EUR/USD fell below the support at 1.1141 and has tested the support at 1.1094 first, with resistance at 1.1212 and 1.1259.
