EURUSD supported near 1.0760, however the near-term outlook remains negative due to weak Eurozone economic activity.
In Thursday’s European session, the EURUSD saw fresh buying interest near a three-month low of 1.0760. The major currency pair strengthened despite preliminary Hamburg Commercial Bank (HCOB) Composite Purchasing Managers Index (PMI) data indicating that Eurozone economic activity contracted in October. The PMI moved slightly to 49.7 from 49.6 in September, below the 50 level that distinguishes expansion and contraction, amid a continued fall in Manufacturing activity is up, and service sector production is increasing moderately.
“The eurozone trapped in a rut, with the economy declining slightly for the second month in a row. The persistent manufacturing decline being mostly offset by modest increases in the service sector. At the national level, it is worth noting that the deterioration of the situation in France was offset by a little slowing in the downturn in Germany. “For the time being, it is unclear whether we will see further deterioration or improvement in the near future,” stated Dr. Cyrus de la Rubia, Chief Economist of HCOB.
HCOB PMI report revealed sluggish business optimism, weak orders from domestic and international markets.
The HCOB PMI report also revealed sluggish business optimism, weak orders from domestic and international markets, and a minor uptick in Input costs and labor reductions hint to the need for economic assistance, prompting predictions of more interest rate cuts from the European Central Bank (ECB).
The ECB already reduced its Deposit Facility Rate by 75 basis points (bps) this year to 3.25%, and traders expect the central bank to lower it again in December. Meanwhile, market investors confused about the expected extent of the rate drop, as the possibility of a larger-than-usual reduction has emerged.
On Wednesday, Mario Centeno, Governor of the Bank of Portugal and ECB policymaker, stated that a 50 basis point rate drop in December is on the table. Centeno warned that adverse risks to growth are increasing.
Daily Market movers: EURUSD benefits at the price of the US dollar.
EUR/USD gained ground against the US Dollar (USD) throughout the European session on Thursday. The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, marginally lower at approximately 104.20 after reaching a new 12-week high around 104.50 on Wednesday.
However, the US Dollar’s near-term outlook remains robust, with investors expecting the Federal Reserve (Fed) to reduce interest rates gradually. According to Wednesday’s Fed Beige Book, overall business activity remained relatively stable through early October, with a minor increase in hiring and mild inflationary pressures.
Meanwhile, the uncertainty surrounding the United States’ (US) presidential election on November 5 has preserved strength in the US Dollar is a float. Market traders concerned that if Trump wins the election, higher tariffs will be impose, having a big impact on the US’s key trading partners.
The next move in the US Dollar will be determine by the preliminary US S&P Global PMI data for October and the Durable Goods Orders data for September, which will be release at 13:45 GMT and on Friday, respectively.
https://voiceoftraders.com/analysis/pound-sterling-consolidates-ahead-of-the-flash-uk-pmi
