The EUR/USD pair has weakened to near 1.0830 during Wednesday’s European session following the release of the preliminary Eurozone Hamburg Commercial Bank (HCOB) Purchasing Managers’ Index (PMI) report for July. The report revealed a surprising slowdown in both manufacturing and services sectors.
The HCOB Composite PMI fell to 50.1, barely above the 50 threshold that separates expansion from contraction. Investors had anticipated a rise to 51.1 from the previous 50.9. The Manufacturing PMI contracted to 45.6, and the Services PMI expanded at a slower pace of 51.9.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented on the weak demand in the Eurozone’s largest economy, which has significantly impacted the manufacturing sector. He noted, “French service providers increased their business activity in July due to preparations for the Olympic Games. In contrast, demand in the German manufacturing sector seems to have dragged down overall private sector output.”
The weak economic activity in the Eurozone is likely to heighten expectations for further rate cuts by the European Central Bank (ECB). However, the price data provided no solace for ECB policymakers. The preliminary PMI report indicated that input prices in the services sector rose at a faster rate, and selling prices increased at a similar pace to the previous survey period.
Currently, traders are anticipating two more rate cuts by the ECB this year, with several ECB officials viewing market expectations for these cuts as appropriate.
Daily Market Movers: EUR/USD Slides as US Dollar Advances
The EUR/USD is experiencing intense selling pressure, dropping to near 1.0830, while the US Dollar (USD) gains strength. The USD is advancing amid concerns that Donald Trump may win the upcoming US presidential election in November, along with uncertainty surrounding the Personal Consumption Expenditures Price Index (PCE) data for June, due on Friday.
The US Dollar Index (DXY), which measures the greenback against six major currencies, has reached a fresh weekly high of around 104.50. Expectations for Trump’s potential return to power increased after an assassination attempt on him. Meanwhile, the Democrats have nominated Vice President Kamala Harris to challenge the Republicans.
Investors are keenly watching the upcoming US core PCE inflation data, as it will provide insights into when the Federal Reserve (Fed) might begin reducing interest rates. The report is expected to show a deceleration in core PCE inflation to 2.5% from May’s 2.6%, with a steady monthly increase of 0.1%.
If price pressures decline as expected or at a faster rate, it will boost expectations for early rate cuts by the Fed. Conversely, stubborn inflation figures would weaken the case for rate cuts. According to the CME FedWatch tool, 30-day Federal Fund futures suggest that the Fed will start lowering its key borrowing rates from their current levels at the September meeting.
In Wednesday’s session, the US Dollar will be influenced by the preliminary S&P Global PMI data for July, to be published at 13:45 GMT. Economists expect the Manufacturing PMI to expand slightly to 51.7 from June’s 51.6. The Services PMI is anticipated to expand at a slower pace of 54.4, down from the previous 55.3.
Technical Analysis: EUR/USD Fails to Hold Triangle Breakout
The EUR/USD has returned inside the Symmetrical Triangle formation on the daily timeframe, failing to sustain its breakout. The currency pair is extending its decline below the 20-day Exponential Moving Average (EMA), currently around 1.0840. The Euro may slide further towards support levels near 1.0800 and 1.0700.
The 14-day Relative Strength Index (RSI) has returned to the 40.00-60.00 range, indicating that bullish momentum has diminished.
On the upside, the round-level resistance at 1.0900 will be a key barrier for Euro bulls.
Related Topics:
