The euro fell against the loonie on Friday following reports of extremely weak German flash manufacturing and services PMI data for September. Canada’s retail sales data for July also disappointed economists. However, it was slightly better than anticipated by the market. Overall, the EUR/CAD pair declined from a high of 1.3270 to a low of 1.3150 in the past 24 hours.
The S&P Global Flash Germany manufacturing PMI (purchasing managers’ index) hit a 27-month low of 48.30 in September, from 49.1 in the previous month, but remained in line with economists’ estimates. However, the country’s manufacturing output index rose to a three-month high of 47 in September, from 45.30 in August. A reading below 50 indicates contraction and vice versa.
Manufacturing production, in the meantime, decreased for the fourth successive month, though the pace of contraction eased to the slowest level since June.
The German Flash Services PMI also fell to a 28-month low of 45.40 in September, from 47.70 in August. However, the reported figures were better than forecasts of 47.20.
Overall, the country’s flash PMI composite output index dropped to a 28-month low of 45.90 in September, from 46.90 in August. The reported figure shows the third successive month of decrease in a row.
The S&P Global Eurozone flash manufacturing PMI dipped to a 27-month low of 48.50 in September, from 49.60 in August. Economists had anticipated a reading of 48.70.
Also, the Eurozone flash manufacturing output index hit a 28-month low of 46.20 in September, compared with 46.50 in August.
The Eurozone flash services PMI fell to a 19-month low of 48.90 in September, from 49.80 in the previous month, but bettered the reading of 49.10 anticipated by economists.
Overall, the Eurozone flash PMI composite output index plunged to a 20-month low of 48.20 in September, from 48.90 in the previous month.
Fresh orders for goods and services declined sharply for the third successive month, with the rate of loss increasing to a level unseen since April 2013. Also, backlogs of unfilled orders dropped for the third successive month. Even though employment growth remained unaltered in September, August’s gain has been the lowest in 17 months.
Furthermore, business anticipations for the forthcoming year plunged sharply, hitting the weakest level since May 2020.
According to Statistics Canada, the country’s retail sales fell by 2.50% m-o-m in July to C$61.30 billion, following an increase of 1% in the previous month, but slightly better than the 2% decline anticipated by economists. The reported figure shows the first decline in seven months. Sales fell in 9 out of 11 subsectors, accounting for 94.50% of retail trade. In volume terms, retail sales fell by 2% in July.
Gasoline stations posted a 14.20% drop in retail sales in July. Likewise, motor vehicle and parts dealers recorded a 0.50% decrease in sales in July. New car dealers posted a drop of 0.60% in July. Used car dealers posted a 1.70% drop in retail sales. Even automotive, parts, accessories, and tire stores posted a decline of 0.90%. On the contrary, other motor vehicle dealers posted a 2.40% increase in retail sales in July.
Statistics Canada also stated that core retail sales, which exclude gasoline stations and motor vehicle and parts dealers, fell by 0.90% m-o-m in July. The reported figure shows the first decline in seven months. Clothing and clothing accessory stores dropped 3.30% in July.
Food and beverage stores reported a decline of 0.80% m-o-m in July. Grocery stores posted a decrease of 0.90%. Likewise, beer, wine, and liquor stores recorded a drop of 1.20%. Miscellaneous store retailers recorded a 0.70% increase in July.
Furthermore, on a seasonally adjusted basis, retail e-commerce sales declined 0.70% m-o-m in July. Also, on an unadjusted basis, retail e-commerce sales grew by 4.30% y-o-y to C$3.20 billion, reflecting 4.70% of aggregate retail trade.
As per the advanced estimate provided by the statistical organization, the country’s retail sales inched up 0.40% m-o-m in August.
The weak economic data from Europe and Canada is expected to keep the EUR/CAD pair range-bound with a slight bearish bias in the days ahead.
Technically, the EUR/CAD pair is descending after failing to break the resistance at 1.3315. The next support is expected only in the vicinity of 1.3090. Additionally, the pair is trading below its 50-day moving average while the stochastics indicator is in the bearish zone. We expect the EUR/CAD pair to stay in a downtrend in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
