Wednesday was the third consecutive day of declines. In European trading, EUR/USD was trading 0.29% lower on the day at 1.0767. The euro remains under pressure, falling 3.3% in October.
Euro PMI is expected to show further similar results
The eurozone will release its September PMI report on Thursday, with little change expected. The manufacturing industry has been in a prolonged recession, contracting for 27 consecutive months. Domestic and international orders are decreasing, while input costs are rising. The business situation continues to deteriorate, and there appears to be no light at the end of the tunnel. Market expectations were 45.1, compared to 45.0 in August. 50 levels separate contraction and expansion.
The sector has expanded for seven consecutive months, making things even better. Growth during this period has been moderate, with market expectations for September at 51.5, up from 50.5 in August.
The PMI points to weakness in the eurozone economy, and lower interest rates would provide much-needed stimulus. Last week's rate cut was the second quarter-point rate cut in just five weeks. The inflation rate has fallen to 3.25%, and inflation is largely under control, and the ECB is shifting from anti-inflation measures to promoting economic growth. This will likely mean further rate cuts by the end of the year.
It jumped out of the gate to cut rates in September, cutting rates by a whopping 50 basis points. Inflation fell to 2.4% from 2.5% in September, moving closer to the Fed's 2% target. Employment has become a top priority, and weak employment data was the main reason the Fed chose to cut interest rates significantly in September. Fed members have signaled that further rate cuts may occur before the end of the year, but they will likely be in 25 basis point increments, which is the Fed's traditional rate hike and cut rate.
EUR/USD technical
- EUR/USD is testing support at 1.0765. Below, 1.0737 is supported.
- 1.0782 and 1.0810 are the next resistance levels
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