Euro under pressure as services PMIs slip

The euro fell close to 1% on Wednesday but has recovered. In the European session, EUR/USD is trading at 1.1430, down 0.09% on the day.

Euro, German PMIs contract in April

Euro and German Services PMIs disappointed in April, as they were lower than expected and fell into contraction territory. This marked the first decline in business activity in Germany and the eurozone since November 2024.

The Euro Services PMI eased to 48.8, down from 50.9 in March and shy of the market estimate of 50.2. Business confidence was sharply lower. Germany's Services PMI fell from 51.0 to 49.7, below the market estimate of 50.5. Concerns about tariffs and uncertainty over economic conditions resulted in a decrease in new orders and weaker business sentiment.

The manufacturing sector remained in contraction. Eurozone Manufacturing PMI rose to 48.7 from 48.6, above the market estimate of 47.5. The German Manufacturing PMI eased to 48.0, down from 48.3 in March but above the market estimate of 47.6.

The weak PMI numbers point to weakness in the German and eurozone economies due to the escalation in trade tensions. The ECB has lowered interest rates seven times in the current easing cycle, and the current key rate is down to 2.25%, its lowest since Dec. 2022. The markets are looking at up to three more rate cuts this year from the ECB. The central bank wants to support the fragile recovery by continuing to trim rates but must keep an eye on the upside risk to inflation due to the tariffs.

It is a light data calendar in the US this week, and the first key events of the week, Services and Manufacturing PMIs, will be released later today. The markets are braced for a weak showing - services is expected to ease from 54.4 to 52.8 and manufacturing to 49.4 from 50.2.

EUR/USD technical

• EUR/USD tested support at 1.1377 and 1.1332 earlier.
• There is resistance at 1.1462 and 1.1507.