The euro declined against the dollar yesterday after weak German manufacturing PMI data was released for August. Although US manufacturing PMI data also fell short of expectations, market attention remained on Germany, the economic powerhouse of Europe. As a result, the EUR/USD pair dropped from a high of 1.1165 to a low of 1.1098 in the past 24 hours.
The S&P Global and Hamburg Commercial Bank (HCOB) German flash manufacturing PMI (purchasing managers’ index) declined to a five-month low of 42.10 in August from 43.20 in the previous month, missing forecasts of 43.40. A reading below 50 indicates contraction, and vice versa.
Also, the HCOB German flash manufacturing PMI output index, reflecting manufacturing production, hit a two-month high of 42.90 in August from 42.50 in July.
Furthermore, the HCOB German flash services PMI decreased to a five-month low of 51.40 in August from 52.50 in July, missing forecasts of 52.30.
Overall, the German flash composite PMI output index dipped to a five-month low of 48.50 in August from 49.10 in July. The reading reflects the second successive month of contraction.
New work inflows declined for the third consecutive month, marking the most significant drop since February. This decrease in incoming orders led to a continued reduction in work backlogs spanning both sectors in August.
German enterprises showed a generally diminished optimism regarding growth potential for the upcoming year, influenced by economic concerns and political and geopolitical uncertainties. Consequently, expectations declined to their lowest level since January, with viewpoints weakening across both sectors under observation.
The S&P Global and HCOB Eurozone flash manufacturing PMI inched down to an eight-month low of 45.60 in August from 45.80 in July, missing forecasts of 45.70.
Also, the HCOB Eurozone flash manufacturing PMI output index hit a two-month high of 45.70 in August from 45.60 in July.
Furthermore, the HCOB Eurozone flash services PMI increased to a four-month high of 53.30 in August from 51.90 in July, exceeding forecasts of 51.70.
Overall, the HCBO Eurozone flash services PMI business activity index surged to a three-month high of 51.20 in August from 50.20 in July.
Output growth reached a three-month high in August, suggesting robust growth momentum. However, new orders declined for the third consecutive month, with the rate of decrease only marginally less severe than in July. The cumulative downturn in fresh business continued to be driven by a decline in fresh export orders, including those within the Eurozone.
Foreign demand saw a significant drop, marking the sharpest decline since February. Additionally, August data indicated a slight decrease in employment within the Eurozone’s private sector, breaking a seven-month streak of growth. Business sentiment fell to its lowest point in 2024 so far, remaining below the long-term average.
According to the US Department of Labor, the country’s unemployment claims grew to 232,000 in the week ending August 17 from 228,000 (upwardly revised from 227,000) in the previous week.
The four-week moving average was 236,000, down from 236,750 (upwardly amended from 236,500) in the previous week.
According to S&P Global, the US flash manufacturing PMI hit an eight-month low of 48 in August from 49.60 in July, missing forecasts of 49.50. Also, the US flash manufacturing output index plunged to a 14-month low of 47.80 in August from 50.50 in the previous month.
However, the S&P Global US flash services PMI inched up to a two-month high of 55.20 in August from 55 in July, surpassing forecasts of 54. Overall, the US flash PMI composite output index dipped to a four-month low of 54.10 in August from 54.30 in the previous month.
In August, employment experienced a decline, marking the first reduction in three months. This drop contributed to net job losses in three of the last five months, representing the weakest period of payroll growth since 1H20. While optimism about future output improved from July’s three-month low, it still stood below the survey’s long-term average.
The mixed economic data from both Europe and the US is expected to keep the EUR/USD pair range-bound in the short term.
Technically, the EUR/USD pair is descending after facing resistance at 1.1150. The next level of support is anticipated to be only near 1.1050. Additionally, the currency pair is trading below its 50-day moving average, while the stochastic indicator is descending towards the bearish zone. Therefore, we anticipate the EUR/USD pair to remain in a downtrend 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.
