EUR/USD Vulnerable Near 1.1100 After Eurozone PMI Data
- EUR/USD faces pressure near 1.1100 following downbeat flash Eurozone PMI data for September.
- Market anticipates a 50 bps interest rate cut by the Fed in November.
- Focus shifts to US PCE inflation data for August.
The EUR/USD struggles to maintain support at 1.1100 in the European session on Tuesday after a significant drop on Monday. The currency pair remains under strain as the recent flash HCOB Purchasing Managers Index (PMI) data for September raises expectations for the European Central Bank (ECB) to implement another interest rate cut in the upcoming October meeting.
Eurozone PMI Data Overview
The PMI report indicated a contraction in business activity, falling below the expected level but staying above the 50.0 threshold that separates expansion from contraction.
- The decline in the HCOB Composite PMI was mainly driven by the manufacturing sector, where activities contracted at a faster rate than anticipated.
- Although the service sector continued to grow, it did so at a slower pace than economists predicted.
The weakening prospects of Eurozone activity pose challenges for ECB policymakers striving for stable market conditions, especially with concerns over persistent price pressures. ECB Governing Council Member Isabel Schnabel recently highlighted the impact of sticky services inflation on headline inflation levels.
Today, President of Deutsche Bundesbank Joachim Nagel is set to provide insights on the ECB’s potential interest rate decisions for the remainder of the year in his upcoming speech at 16:00 GMT.
Market Movers: EUR/USD and US Dollar Dynamics
- EUR/USD remains under pressure as the US Dollar strengthens post the release of mixed US S&P Global PMI data for September.
- US Dollar Index (DXY) aims to maintain levels above 101.00, impacting the USD value against major currencies.
- Expectations for a 50 bps rate cut by the Fed in November contribute to the uncertain outlook of the US Dollar.
US S&P Global PMI Data Analysis
The US S&P Global Composite PMI slightly decreased to 54.4 from August’s 54.6, with manufacturing activities unexpectedly declining further. However, the Services PMI expanded at a quicker pace of 55.4 but dipped from the previous reading of 55.7, indicating subdued business sentiment due to election-related uncertainties.
Traders anticipate the Fed’s decision on a 50 bps rate cut in November, contingent on incoming data, particularly the next jobs report.
Upcoming Economic Data
Investors await the release of the Personal Consumption Expenditures Price Index (PCE) for August on Friday. The data will influence market expectations for a Fed interest rate cut based on inflation trends.
Technical Analysis: EUR/USD Insights
EUR/USD hovers near 1.1100, finding support close to the 20-day Exponential Moving Average (EMA) near 1.1090.
- The currency pair’s outlook remains bullish if it maintains above the Rising Channel pattern breakout near 1.1000.
- The 14-day Relative Strength Index (RSI) signals weakening momentum.
Key resistance lies at 1.1200, with support at 1.1000 and 1.0950.
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