- S&P Global PMIs in the United States sparked recession jitters and bolstered the US Dollar.
- Eurozone data was better than estimated, though inflation remains high, while PMIs in contractionary territory.
- EUR/USD Price Analysis: Daily close below 1.0592 to exacerbate a fall to the 20-day EMA.
The EUR/USD remains subdued during the North American session, following monetary policy meetings by the Federal Reserve (Fed) and the European Central Bank (ECB), with both entities raising rates amidst a period of high and stickier inflation. However, a surprisingly hawkish tone employed by the ECB President Christine Lagarde capped the fall of the Euro (EUR) vs. the US Dollar (USD) amid a wide interest rate differential. Therefore, the EUR/USD is trading at 1.0620s, fluctuating.
Recession fear in the United States increased after the dismal PMIs report
Investors' sentiment remains sour after worldwide central banks continue to tighten monetary conditions. A light US economic docket featured the release of the S&P Global PMI for December missed the estimates, reigniting recessionary fears in the United States (US) economy. Manufacturing PMI dived to 46.2 vs. 47.8 expected, while the Services Index slid to 44.4 from 46.5 foreseen. Consequently, the S&P Global Composite Index dropped to 44.6 against the estimated 46.9.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said, “Business conditions are worsening as 2022 draws to a close, with a steep fall in the PMI indicative of GDP contracting in the fourth quarter at an annualized rate of around 1.5%.” Williamson added that hiring has slowed in the manufacturing and services segment. The survey suggests that Fed rate hikes, although taming inflation, recession risks tilted to the upside.
Of late, the New York Fed President John Williams commented that the labor market remains tight, and that would warrant further action by the Federal Reserve, said in a Bloomberg interview. Williams expects inflation to get towards 3 to 3.5% in 2023, though he added “that the real issue is how do we get it all the way” to the Fes’s 2% target.
Euro area data was encouraging though inflation remains in double digits
Meanwhile, the calendar was busy in the European session, with S&P Global PMIs released for the Euro area, France and Germany, with most of the figures being better than expected. Regarding the Harmonized Index for Consumer Prices (HICP), inflationary data for the Eurozone was 10.1% YoY, below the 10.6% of the previous month, though higher than the estimate of 10% reading. The core reading was unchanged at 5%.
Additionally, some ECB policymakers expressed that inflation poses a challenge, and most members expect further rate hikes at the following meetings.
EUR/USD Price Analysis: Technical outlook
From a daily chart perspective, the EUR/USD is still upward biased, though it should be said that a close below 1.0592 could pave the way for further downside. After the EUR/USD rallied to multi-month highs around 1.0736, since then, it has been a one-way drive south, though the Euro is set to finish the week positive. Oscillators with the Relative Strength Index (RSI) and the Rate of Change (RoC), suggest that a correction might be underway. Though the fall’s scope is unknown, it will face its first support at around 1.0500, closely followed by the 20-day Exponential Moving Average (EMA) dynamic support at 1.0479.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Follow us on Telegram
Stay updated of all the news
EUR/USD: Euro recovers ground but not re-attracting bulls yet Premium
The EUR/USD rose on Monday toward the 1.0800 area, recovering some of Friday’s slide, supported by an improvement in market sentiment, amid easing concerns on the banking sector.
GBP/USD closes in on 1.2300 as mood improves
GBP/USD has preserved its bullish momentum and advanced to the 1.2300 area in the second half of the day on Monday. The risk positive market atmosphere makes it difficult for the US Dollar to stay resilient against its rivals and fuels the pair's daily rally. Eyes on BOE Governor Bailey's speech.
Gold: XAU/USD pared losses and consolidates around $1,950.00 Premium
Spot gold trades in the $1,950 price zone, sharply down on Monday as investors move away from safe-haven assets. The sentiment is positive at the start of the week amid easing concerns related to a global banking crisis.
MicroStrategy buys $150 million worth of Bitcoin as institutional interest soars to eight-month high
Bitcoin has been noting increasing institutional interest for the last few days as whale movement on the network grew.
US Consumer Confidence Preview: No good news for Americans Premium
The United States will publish the March Conference Board Consumer Confidence index, and market players anticipate it has contracted to 101 from 102.9 in February.