Euro steady as PMIs

The euro is trading quietly in the Friday session. Currently, EUR/USD is trading at 1.1636, up 0.10% on the day.

Manufacturing PMIs within expectations

German and eurozone Manufacturing PMIs for October continued to point to strong manufacturing activity. The German Manufacturing PMI came in at 58.2 and the eurozone release at 58.5. Both PMIs showed little movement from September, but were stronger than expected. Business activity slowed in both Germany and the eurozone, although it too remains in expansionary territory, as seen in the Services PMIs.

The PMIs may be in positive territory, but that of course is only part of the economic picture. The eurozone is clearly in a recovery phase, but growth has been affected by product shortages and supply chain disruptions. Businesses have had to deal with higher costs, which eventually make their way to the consumer and have resulted in higher inflation. The ECB has maintained that inflation is temporary, and unlike the Fed and the BoE, is not faced with surging inflation that may require interest rate hikes to wrestle under control.

At the same time, most major central banks are embarking on a tightening cycle, and the ECB may not be able to go it alone with an accommodative policy. If growth weakens and inflation gathers steam, ECB policy makers will have to consider scaling back the bank’s asset purchase programme.

In the US, positive data on Thursday, led by Initial Unemployment Claims, provided the dollar with a boost and also raised speculation about a Fed taper, which is widely expected before the end of the year. The dollar index continues to trade in a range between 93.50 and 94.00 and is at 93.69 in Europe. A drop below 93.50 could see the index fall to the 0.93 line.

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EUR/USD Technical

  • EUR/USD is testing resistance at 1.1640. Above, we find resistance at 1.1682
  • On the downside, there are support levels at 1.1541 and 1.484

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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