The EURUSD currency pair was trading down over 49 pips as the euro remained predominantly weaker than the US dollar. The pair’s weakness could be directly attributed to the weak PMI data across the eurozone that allowed the US dollar to rally against the weaker euro.
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The weak PMI data included the French flash manufacturing PMI, recorded at 44.5, missing analysts' expectations set at 46.0. At the same time, French Flash Services PMI came in at 47.4, missing consensus estimates of 48.5.
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The same scenario occurred in Germany, where the German Flash Manufacturing PMI was recorded at 38.8, missing analysts’ consensus estimates of 40.9. At the same time, the German Flash Services PMI came in at 52.0, missing analysts' estimates of 53.2.
The weak manufacturing and services PMI data from across the eurozone indicate that the economic activity in the region is contracting due to the record-high interest rates pursued by the European Central Bank (ECB) and the record-high inflation.
The weakness across the euro zone’s two leading economies paints a bleak future picture. It makes it more difficult for the ECB to continue hiking rates amid the significant deterioration in business activity witnessed across the manufacturing and service industries.
Today's data further increases the probability that the eurozone economy will enter a recession in the year's second half. The data also increases the pressure on the ECB to revise its rate-hiking outlook since the economic weakness could be attributed to the central bank’s rate hikes.
The ECB is expected to announce its latest interest rate decision on Thursday this week, and the disappointing PMI data may play a vital role in the central bank’s decision-making. The chances of a rate hike may have shrunk slightly following today’s data.
The upbeat US Flash Manufacturing PMI release, which came in at 49.0, beating analysts’ estimates of 46.1, also pushed the currency pair lower. However, the US Flash services PMI disappointed by coming in at 52.4, missing consensus estimates of 54.0, but had a muted impact on the pair, which kept falling.
*This is not investment advice.
The EURUSD price chart.
The EURUSD currency pair was trading down 49.5 pips (0.44%) as the US dollar rallied against the euro.
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