- The PMIs for Germany and the Eurozone were revised upwards
- The euro slide continues for a fifth day
- US ISM Purchasing Managers' Index for Services exceeds forecast
The euro extended its losses on Tuesday. In the North American session, EUR/USD is trading at 1.0792, down 0.41%. The euro fell for the fifth day in a row, losing 1.9% in that time.
Services PMIs in Germany and the Eurozone were revised upwards in November, but that wasn't enough to stem the euro's dire slide. The German PMI was revised significantly to 49.6, after the preliminary reading of 48.7 in October was 48.2. The euro zone services PMI was also revised upwards to 48.7 in November, compared with a preliminary release of 48.2 and up from 47.8 in October.
The acceleration in the PMI is good news, but we must remember that readings below 50 for both PMIs indicate a decline. The euro zone's services sector posted four consecutive months of declines, while Germany's sector contracted in three of the last four months. The manufacturing sector is doing even worse, and the dire economic situation could increase pressure on the ECB to cut interest rates and stimulate the economy.
The ECB has not indicated that rate cuts are imminent, although futures markets have priced in a rate cut in mid-2024 as inflation falls and the economy cools. On Monday, ECB Vice President Luis de Guindos said the decline in the latest inflation report was good news, but future interest rate decisions would depend on the data. ECB President Lagarde has repeatedly said interest rates will remain in restrictive territory for an extended period and warned that inflation could pick up in early 2024.
In the US, the ISM Services Purchasing Managers' Index was stronger than expected in November, rising to 52.7. This was higher than October's reading of 51.8 and the consensus estimate of 52.0. Both business activity and employment accelerated in November. The index remained in expansion mode (above the 50 line) throughout the year and was a key factor in strong US growth.
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EUR/USD Technical
- EUR/USD tests support at 1.0803. Below there is support at 1.0722
- 1.0910 and 1.0991 are the next resistance levels
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