The euro edged lower on Wednesday but has recovered. In the North American session, EUR/USD is trading at 1.0860, up 0.07% on the day at the time of writing.
Eurozone PMIs weaker than expected
Eurozone PMIs can be viewed as monthly report cards for the services and manufacturing services. The July PMIs decelerated and indicate a bumpy eurozone recovery. The Services PMI eased to 51.9, down from 52.8 and shy of the market estimate of 53. It was a similar trend for the Manufacturing PMI, which dipped to 45.6, down from 45.8 in May and below the market estimate of 46.1. Manufacturing has now been in contraction territory for over two years and there doesn’t seem to be a light at the end of the tunnel, as global demand remains weak.
The PMI reports won’t set off alarm bells but points to sluggish growth for the eurozone. The year started off on an optimistic note as GDP climbed 0.3% in the first quarter q/q, up from -0.1% in the fourth quarter of 2023. There are signs that the second quarter won’t be able to keep pace and today’s soft PMIs reinforce that concern.
The European Central Bank took the plunge in June and cut interest rates, so it wasn’t a surprise that the ECB elected to hold rates last week. The markets are expecting more cuts before the end of the year and weak data such as today’s PMIs strengthen the case for a rate cut in the near term, which could inject some life into the economy. The ECB hasn’t provided any hints about rate cuts, although ECB President Lagarde noted at last week’s meeting that growth in the eurozone likely slowed in the second quarter.
EUR/USD technical
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EUR/USD tested support at 1.0832 earlier. The next support level is 1.0812.
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1.0865 and 1.0885 are the next resistance lines.
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