The euro rose against the greenback yesterday despite the release of worse-than-anticipated Eurozone Sentix investor confidence index data for August. The US final services PMI data for July also missed estimates. However, the market was more concerned about the ongoing geopolitical tensions in the Middle East.
Additionally, last week’s poor US employment data also discouraged market participants from placing any bullish bets on the greenback. Overall, the EUR/USD rallied from a low of 1.0896 to a high of 1.1008 in the past 24 hours.
The final data published by S&P Global and Hamburg Commercial Bank (HCOB) indicated that the German services PMI (purchasing managers’ index) business activity index hit a four-month low of 52.50 in July from 53.10 in June. The initial estimates had pegged the reading at 52.
Economists did not anticipate any change in the initial reading. Notably, this is the fifth successive monthly reading above 50, indicating continuous business expansion. However, the slight decline in the reading reflects a slowdown in the pace of expansion to the weakest level since March.
The HCOB German composite PMI output index also dropped to a four-month low of 49.10 in July from 50.40 in June. New orders rose for the fourth successive month. However, the pace of growth declined yet again. This was partly due to a decrease in fresh work from non-domestic clients at the beginning of the third quarter.
Service providers addressed their pending business, including new orders and projects awaiting completion, at an accelerated pace in July. The reduction in backlogs was notably the most significant since February and was substantial overall. Additionally, recent data indicated a modest increase in business expectations for growth prospects in the coming year, although it remains below the recent peak observed in May.
The S&P Global HCOB Eurozone final services PMI business activity index decreased to a four-month low of 51.90 in July from 52.80 in June. The preliminary report had pegged the reading at 51.90. Economists did not anticipate any change in the preliminary reading.
The HCOB Eurozone Composite PMI Output Index fell to a five-month low of 50.2 in July from 50.90 in June. A reading above 50 indicates expansion, and vice versa.
Demand conditions in the Eurozone worsened, marking the second consecutive monthly decline in new business, with the rate of decline accelerating compared to June. Looking forward, Eurozone private sector firms anticipate higher activity levels over the next 12 months, although confidence in these forecasts has diminished. Overall, businesses exhibited the lowest level of optimism since January. Also, employment in the Eurozone private sector largely stagnated at the start of the third quarter.
The Eurozone Sentix investor confidence index plunged to -13.90 in August, reflecting the lowest level since January 2024, from -7.30 in July and disappointing the market, which was expecting an improvement in the reading to -5.50.
The current situation index fell to -19 in August, representing the lowest level since February 2024, from -15.80 in July. Likewise, the expectations index worsened to -8.80 in August, mirroring the lowest level since December 2023, from 1.50 in July.
In the US, the Sentix investor confidence index plunged to 1.60 in August from 10.70 in July. The fourth successive monthly decline reflects the lowest level since October 2023.
Similarly, the current situation index fell to 14 in August from 24.80 in July. The expectations index worsened to -10 in August, reflecting the lowest level since July 2023, from -2.50 in July.
In Asia (excluding Japan), the Sentix investor confidence index fell to 5.10 in August from 13.10 in July. The current situation index declined to 5.30 from 12.50. The expectation index decreased to 5 from 13.80.
According to S&P Global, the US final services PMI fell to 55 in July from 55.30 in June. The preliminary estimates pegged the reading at 56. Economists did not anticipate any change in the preliminary estimates. The reading reflects the 18 successive months of growth in service activity. Fresh business from overseas grew for the first time in six months, although only slightly and to a smaller extent than payment rose for the second consecutive month, although slightly and at a lower rate than in June. Cumulative fresh orders. Employment rose for the second consecutive month, although slightly and at a lower rate than in June.
Overall, the S&P Global US composite PMI output index inched down to 54.30 in July from 54.80 in June. However, the figures reflect robust monthly growth in private sector business activity in the US at the beginning of 3Q 2024.
Business confidence inched down, but firms remained optimistic that output would rise in the upcoming 12 months.
The weak economic data, Middle East geopolitical tensions, and signals of a US economic slowdown are expected to keep the EUR/USD pair slightly bullish in the short term.
The historical price chart indicates that the EUR/USD pair is rising after testing the support at 1.0900. The next resistance is anticipated to be only near 1.1125. Additionally, the stochastic indicator is in the bullish zone. Therefore, we anticipate the EUR/USD pair to remain in an uptrend for the next few trading sessions.
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.
