• Wed. Feb 8th, 2023

Lackluster Eurozone PMI adds Further Pain to EURUSD

ByZain Vawda

Aug 23, 2022
EUR Breaking News: Lackluster Eurozone PMI adds Further Pain to EURUSD

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Eurozone PMI Key Points:

  • Eurozone S&P Global Manufacturing PMI Flash (AUG)49.7 vs July 49.8. 26-month low.
  • Eurozone S&P Global Services PMI Flash (AUG)50.2 vs July 51.2. 17-month low.
  • EURUSD Remains Weak.

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The seasonally adjusted S&P Global Eurozone PMIComposite Output Index dropped to 49.2 in August, from 49.9 in July, according to the ‘flash’ reading. The index signalled a second successive reduction in business activity across the eurozone following a 16-month period of growth. Although still only slight, the latest decline was sharper than that seen in July.

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The outlook for the rest of the year from the Eurozone remains bleak as rising prices mean discretionary spending is being diverted to essentials such as food, supplies, and loan repayments. Cost of living pressures means that the recovery in the service sector following the lifting of pandemic restrictions has ebbed away, while manufacturing remained mired in contraction in August. Declining output is now being seen across a range of sectors, from basic materials and autos firms through to tourism and real estate companies as economic weakness becomes broader based in nature.

The Euro remains under pressure and has breached parity once again against the dollar, which begs the question “will we see a more hawkish European Central Bank (ECB) this week?” The market prices a 54bp rate hike for the September 8th meeting. Could the ECB start to discuss prospects of more aggressive rate increases if it wants to offer the EUR/USD some support? According to Bundesbank Chief Joachim Nagel, “Given high inflation, further interest-rate hikes must follow,the past few months have shown that we have to decide on monetary policy from meeting to meeting.” The Bundesbank chief will be attending the Federal Reserve’s Jackson Hole Economic Symposium which should provide guidance on the Federal Reserve’s next move.

Market reaction

EURUSD 1H Chart

EUR Breaking News: Lackluster Eurozone PMI adds Further Pain to EURUSD

Source: TradingView, prepared by Zain Vawda

Since breaking parity yesterday, we saw a new yearly low printed with further declines ahead of the PMI release. A subdued reaction after the PMI release sees the pair trading at around 0.9927, 20 odd pips lower than the previous YTD lows around 0.9952. Should dollar bids persist today we could very well drop lower and test the 0.9850-0.9800 area as pressure on the euro remains strong.

Key Intraday Levels Worth Watching:

Support Areas

Resistance Areas

— Written by Zain Vawda for DailyFX.com

Contact and follow Zain on Twitter: @zvawda



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