Euro falls to late-July low, while Iran conflict shows 'few signs' of hitting Eurozone activity

The euro has fallen to its lowest level since late July, as investors take a sceptical view of the comments out of Tehran, with it remaining unclear whether these actually improve the chances of a US-Iran agreement any time soon.

Falling oil prices, while clearly a structural positive for the common currency, are also something of a double-edged sword, given that they typically accompany a more aggressive downward repricing of ECB rates relative to the Fed - a dynamic that tends to weigh on EUR/USD via rate differentials, even though falling oil supports the currency through the terms-of-trade channel.

This morning’s upbeat Euro Area PMI figures were, somewhat surprisingly, roundly ignored by currency markets, despite both the services and composite indices coming surprisingly comfortably to the upside.

The key services index jumped to 53.0 in September, the highest level since November, while the composite number rose to 53.1 from 52.0, after the manufacturing subindex remained unchanged.

So far, there appears few signs that the ongoing Iran conflict is having any describable negative impact on activity in the bloc, which should support a gradual move higher in the euro from current levels.