The euro remained range-bound against the greenback following the release of poor economic data from Germany and the US. While German retail sales recorded the steepest decline in 28 years in the year ended June, US construction spending unexpectedly contracted in the same period. Overall, the EUR/USD pair fluctuated between 1.0210 and 1.0275 in the past 24 hours.
According to Destatis, German retail sales fell by 1.60% m-o-m in June, following a growth of 1.20% (upwardly amended from 0.6%) in May, and disappointed economists anticipating a 0.20% increase in the reported month.
Food sales fell by 1.60%, while non-food sales dipped by 3.30%. Specifically, textiles, clothing, shoes, and leather declined 5.40%. Internet and mail order sales dropped 3.80%.
On a year-over-year basis, retail sales slumped 8.80% in June, the steepest decline since 1994. The S&P Global / BME Germany Manufacturing Purchasing Managers’ Index (PMI) declined to 49.30 in July, from 52 in June, but a notch higher than the preliminary reading of 49.20. Economists did not anticipate any change in the preliminary reading. Notably, a reading below 50 indicates contraction and vice-versa.
The main reason for the contraction is a sharp fall in fresh orders, which recorded the steepest drop since May 2020. Notably, fresh export orders remained slightly better in comparison to total sales, albeit the pace of decrease increased to the quickest level in more than two years. Eventually, production levels throughout the country’s manufacturing sector were negatively impacted, declining for the third successive time in the last four months.
The S&P Global Eurozone manufacturing PMI declined to 49.80 in July, from 52.10 in June, indicating the first downturn in the manufacturing sector environment in more than two years. The preliminary estimates pegged the index at 49.60. Economists did not anticipate any change in the preliminary index reading.
Excluding stocks of purchases, all the PMI’s sub-components had a negative impact on the index reading. The Eurozone unemployment rate was 6.60% in June, unaltered from May, but down from 7.90% in the similar period of 2021. The reported figure was in line with economists’ estimates.
Specifically, compared with June 2021, the number of jobless people fell by 1.957 million in the Eurozone. In the US, the S&P Global US Manufacturing Purchasing Managers’ Index (PMI) fell to 52.20 in July, from 52.70 in June, and a notch lower than flash estimates of 52.30. Economists did not anticipate any change in the flash estimates.
The reported reading reflects the lowest level in two years and indicates a slightly sluggish performance of the manufacturing sector. Notably, output declined for the first time in almost two years. Also, fresh orders decreased for the second consecutive month in July.
As per the data published by the Institute for Supply Management, the US manufacturing PMI inched lower to 52.80 in July, from 53 in June, but surpassed the reading of 52.30 anticipated by economists.
The reported reading indicates overall economic expansion for the 26th successive month, following a contraction in April and May 2020. However, July’s figure is the lowest level since June 2020 (52.40).
The new orders index fell by 1.20 points to 48 in July. Likewise, the production index dipped to 53.50 from 54.90. The employment index fell for the third successive month to 49.90, down from 47.30. However, the new export order index reading increased 1.90 points in July to 52.60.
According to the US Census Bureau, the country’s construction spending declined 1.10% m-o-m in June to $1.76 trillion, following a small growth of 0.10% in May. The market had anticipated a 0.30% rise in US construction spending in June. The reported figure reflects the steepest decline since February 2021.
Private construction contracted by 1.30%. Similarly, public construction fell by 0.50%.
The mixed economic data from both Europe and the US is expected to keep the EUR/USD pair range-bound for the next few trading sessions.
The historical price chart indicates that the EUR/USD pair is rising after testing the support at 1.0190. The next resistance is anticipated only near 1.0450. Additionally, the currency pair is trading above its 50-day moving average while the MACD indicator is showing a negative reading. Therefore, we anticipate the EUR/USD pair to remain in an uptrend in the short term.
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.
