The EUR base rate faced a significant decline against the US Dollar (USD) during the mid-North American session on Tuesday. The drop came as data revealed a notable slowdown in business activity across the Eurozone (EU), coinciding with the European Central Bank’s (ECB) aggressive tightening measures. As a result, the EUR/USD pair traded at 1.0726, marking a 0.63% loss.
EUR/USD Forum: Euro Stumbles on Sluggish EU PMI Data
Euro’s Slide Continues as EU’s Producer Price Index (PPI) and PMI Figures Disappoint
The Euro‘s descent against the US Dollar intensified as EU data disappointed. The Producer Price Index (PPI) for July came in at -0.50%, slightly worse than expectations of a -0.60% contraction but worse than June’s -0.40% decline. Despite this concerning trend, consumer inflation in the EU remains above 5.00%. Meanwhile, the EU’s Purchasing Managers’ Index (PMI) fell below expectations and the previous month’s data, signalling a weakening economy.
ECB Remains Hawkish on Inflation Despite Economic Slowdown
ECB Stands Firm on Inflation Amidst Economic Weakness
While acknowledging the EU’s economic slowdown, ECB President Christine Lagarde and policymakers maintain a hawkish stance on inflation. Lagarde emphasized that inflation remains too high, and the central bank’s responsibility is to anchor inflation expectations. However, a recent ECB consumer survey reported that inflation expectations among EUR swap rates are rising, with a peak of 2.40% expected in July for the next three years.
US Factory Orders Beat Expectations
US Factory Orders for August Show Resilience
In the United States, August’s Factory Orders exceeded expectations, coming in at -2.10%, better than the estimated -2.50%. This followed four consecutive months of increases, indicating resilience in the US economy. Additionally, Fed officials, including Fed Governor Christopher Waller and Cleveland’s Fed President Loretta Mester, hinted at the possibility of interest rate adjustments.
US Economic Outlook and Impact on USD
US Economic Indicators and Their Influence on the US Dollar
As the Federal Reserve’s 525 basis points of tightening continue to affect the US economy, traders anticipate the Fed’s upcoming decisions. While a rate hike is not expected at the next meeting, November could see an increase. The release of the August US ISM Non-Manufacturing PMI and the S&P Global Services PMI is awaited, with expectations of minor slowdowns. Such outcomes could influence the Federal Reserve’s actions, affecting the 100 EUR to USD rate.
EUR/USD Technical Analysis: Support and Resistance
Examining EUR/USD’s Exchange Rate Technical Outlook
EUR/USD’s technical analysis reveals the pair’s drop below the 200-day Moving Average (DMA) and the 1.0800 level. Although buyers intervened to halt further losses, the EUR base rate remains under pressure. Key support levels include 1.0700, 1.0635, and 1.0516, while resistance levels are at 1.0800, 1.0810 (200-DMA), and 1.0900.
