Article by ForexTime
The EUR/USD hit a fresh 11-month low on Monday, driven down by weaker than expected PMI numbers. The dollar continues to benefit from an interest rate differential that is favoring the greenback as the two central banks diverge in policy.
The Eurozone August final manufacturing PMI was revised lower to 50.7 from 51.8 in the preliminary reading, down from 51.8 in July. Data The reported showed a slowdown in manufacturing growth across the Eurozone, as the trade war with Russia is eroding confidence in all areas of the European economy. The data will add to pressure on the ECB to consider further easing measures, but they are likely to want to see the effects of the TLTRO program scheduled to take effect this month.
The individual PMI readings were also discouraging. The Italian PMI declined back below the 50 point no change mark to just 49.8, after 51.9 in the previous month. Readings below 50 reflect contraction. The German PMI was revised to 51.4 from 52.0 reported initially. The final French reading showed an upward revision in the headline rate to 46.9 from 46.5, but this is still down from 47.8 in July.
Growth was also reported with the German Q2 GDP printing at -0.2% quarter over quarter. The German economy contracted 0.2% quarter over quarter in Q2 of the year, after rising 0.7% quarter over quarter in Q1. Imports were reported at a stronger rate than expects and private consumption declined to 0.1% quarter over quarter from 0.8% quarter over quarter. Machinery and equipment investment fell 0.4% quarter over quarter, after two quarters of robust growth, which ties in with the slowdown in confidence indicators.
The Euro hit a new low for the move and is poised to test support near the September 2013 lows at 1.31. Resistance is seen near the 10-day moving average at 1.3210. The exchange rate has been oversold for 10-trading sessions, ahead of the ECB meeting. This could set up for a short squeeze regardless of the outcome from Draghi’s coming announcement.
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