The EURUSD currency pair was trading down over 60 pips as the US dollar rallied against the single currency following the release of multiple PMI reports from across the euro area. Most of the PMI releases did not meet analyst expectations weakening the euro.
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The euro fell for the second consecutive day after the German flash manufacturing PMI came in at 41.0, missing analysts' expectations set at 43.6. The figure was also lower than the previous print of 43.2.
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The German services PMI also missed analysts' consensus estimates of 56.3 and was recorded at 54.1 compared to the previous figure of 57.2. The French services PMI also missed expectations by coming in at 48.0, while analysts expected 52.2 from the previous figure of 52.5.
The French manufacturing PMI also missed analysts' estimates, contributing to the decline. On a macro scale, most analysts believe that the euro will continue strengthening against the US dollar, given that the ECB is still hiking rates while the US has paused its rate hikes.
Further interest rate hikes will reduce the rate differential between the US and the Eurozone, contributing to the euro’s strength. Therefore, many expect the euro to rally higher over time, which could push the currency pair higher.
The euro is also set to benefit from a potential recovery in the eurozone economy as international trade resumes and countries such as Germany, the region’s largest economy, return to generating a trade surplus.
While the US economy is expected to enter a recession in the second half of the year, the Chinese and eurozone economies are expected to perform much better. The recent easing measures by the People’s Bank of China (PBoC) could stimulate more growth in the Chinese economy, benefitting the euro.
Therefore, investors betting on the euro should look at the region’s fundamentals to determine if the euro will strengthen or weaken. However, a return to positive current account balances by the leading eurozone economies should be a boon for the euro.
*This is not investment advice.
The EURUSD price chart.
The EURUSD currency pair was trading down 60.3 pips (0.55%) as the dollar rallied against the euro.
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