Eurozone PMI temporarily helps the Euro but is unlikely to change the trend

Alexander Kuptsikevich FxPro

On Thursday, S&P Global released flash estimates for the October PMIs across major regions. The significance of this data increases over time, and in Europe, it often influences market trends.

The European data was mixed, but the currency market focused on stronger-than-expected numbers from Germany.

In France, the services sector is experiencing a deeper decline following a boost from the Olympics. The services index dropped from 49.6 to 48.3, marking its lowest point since the end of last year. Meanwhile, the manufacturing PMI remains in contraction territory at 44.5, staying below 50 for the second consecutive month. The composite index also fell to a nine-month low of 47.3.

Index estimates for Germany shifted the euro’s trajectory, beating forecasts by a wide margin. The services index rose to 51.4 after four months of decline. The manufacturing PMI rose from 40.6 to 42.6, although 40.7 was expected. This rebound offers some reassurance, as German manufacturing, as measured by the PMI, has been in contraction territory since July 2022. As a result, the composite index stands at 48.4 in October, remaining below the 50 mark for the past four months.

Investors and traders clearly saw hope, as they noted the slight reversal of the German PMIs towards growth, prompting a 0.35% jump in the EUR/USD immediately after the release. However, in the short term, the single currency struggled to break above the 1.08 level, which appears to act as local resistance.

The PMI data for the entire Eurozone exceeded expectations for the manufacturing sector, with the index reaching a five-month high of 45.9. Meanwhile, growth in the services sector picked up slightly, as the composite index increased from 48.9 to 49.7, remaining in contraction territory.

Better-than-expected German data helped the euro pause its decline. Against this backdrop, EURUSD may be able to start a corrective bounce after its almost continuous failure since the end of September. However, the improvement is too modest to affect the ECB’s dovish tone on interest rates in the coming weeks. The central bank is still expected to cut rates actively.

Author

Alexander Kuptsikevich

FxPro

Alexander Kuptsikevich, a senior market analyst at FxPro, has been with the company since its foundation. From time to time, he gives commentaries on radio and television. He publishes in major economic and socio-political media.

AUD/USD bulls seem hesitant below 0.7050 ahead of RBA on Tuesday

AUD/USD reverses an Asian session dip on Monday as renewed optimism over Iran diplomacy boosts investor confidence, keeping a lid on the safe-haven US Dollar and supporting the risk-sensitive Aussie. Spot prices, however, remain below the one-month high, touched last Thursday, as bulls wait for the crucial RBA decision before taking fresh positions.

USD/JPY climbs to 158.00 neighborhood as BoJ uncertainty weighs on the JPY

The USD/JPY pair gains some positive traction at the start of a new week, recovering further from Friday's post-Bank of Japan (BoJ) swing low to sub-157.00 levels. The momentum lifts spot prices to the 158.00 neighborhood during the Asian session and seems unaffected by fresh intervention warning from Japan's Finance Minister Satsuki Katayama.

Gold trims intraday gains; trades below $3,900 as Fed hike bets counter weak USD

Gold trims part of its modest intraday gains, trading with a mild positive bias below the $3,900 mark during Monday’s early European session. The US Dollar attracts fresh sellers amid optimism over a potential diplomatic breakthrough to end the US-Iran war and offers some support to the commodity. Meanwhile, US Federal Reserve rate-hike bets remain firmly on the table amid energy-driven inflation concerns, keeping the non-yielding yellow metal near the October 2025 low touched on Friday.

Dogecoin risks deeper slide as whales diverge

Dogecoin hovers around $0.075 on Monday after falling for the fifth consecutive week since the end of September. Santiment data shows diverging whale activity, as large holders reduce their positions while smaller whale wallets accumulate tokens. Meanwhile, weakening on-chain metrics and a deteriorating technical outlook suggest that DOGE could remain vulnerable to further losses.

Middle East War updates: Iran warns of expanded strikes against US despite progress in talks

Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.