EUR/USD – Stable But Euro PMIs Raise Concerns

The euro is steady on Wednesday, as EUR/USD trades in the mid-1.32 range in the European session. The pair has slipped over a cent this week, and finds itself at its lowest levels since September 2013. In economic news, a host of Euro PMIs painted a mixed picture. It's a busy day as well in the US, led by two key events - Unemployment Claims and the Philly Fed Manufacturing Index.

The Eurozone released Services and Manufacturing PMIs, and the results were mixed. French Manufacturing PMI came in at 46.5 points, the fourth straight reading below 50, which separates between contraction and expansion. French Flash Services PMI came in at 51.1, above the estimate. In Germany, the Service and Manufacturing PMIs both softened in July but beat the estimates. Eurozone Manufacturing and Services PMIs also weakened in July. There is cause for concern as most of the PMI readings were weaker compared to a month earlier.

The Federal Reserve released its policy meeting minutes on Wednesday. The minutes were hawkish in tone, with the Fed saying that an interest rate hike could come sooner rather than later if employment numbers continue to improve. The Fed said that the economy continues to improve, but the QE program, which is scheduled to wind up in October, will not be accelerated. Once the asset purchase scheme is terminated, the guessing game as to a rate hike will only intensify.

Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Thursday. This will be Janet Yellen's first appearance as Fed chair at the conference. Yellen is expected to discuss the US employment market rather than monetary policy, but the markets will be listening closely for any hints as to the timing of an interest rate hike.

The US economy has been moving in the right direction, but inflation numbers in the US remain at very low levels. Earlier in the week, CPI and Core CPI, the primary gauges of consumer inflation, both posted paltry gains of 0.1%. These weak readings come on the heels of PPI, a manufacturing inflation index, which also came in at 0.1% last month. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. Meanwhile, US housing numbers were sharp. Building Permits improved to 1.05 million, beating the estimate of 1.00 million. Housing Starts jumped to 1.09 million, easily beating the estimate of 0.97 million.

EUR/USD 1.3268 H: 1.3278 L: 1.3242