The Euro single currency saw weakness early into the trading day with services PMI across the major economies of the Eurozone disappointing further. The single currency which opened the week on a bullish tone failed to capitalize on its gains as the Greenback managed to take hold of its bullish rally paving way for further weakness into EURUSD.
- Spanish services PMI was weaker at 52.7, below 56.2 estimates and down from 55.9 last month.
- Italian services PMI managed to come in softly higher at 51.8 vs. 50.2 estimates and higher from 50.8 previously
- German PMI services was unchanged at 52.1
Earlier this week, manufacturing PMI from the Eurozone was relatively mixed.
- Spanish manufacturing PMI was higher at 54.7, above estimates of 53.1 and up from previous month’s 52.6
- Italian manufacturing PMI was down 49, below estimates of 49.5 and unchanged from the previous month
- German manufacturing PMI was down 49 vs. estimates of 49.4 and unchanged from the previous month
The Eurozone final manufacturing PMI was softly lower at 50.1 vs. estimates of 50.4 and down from 50.4 previously while services PMI was down 51.1, softly lower than last month’s 51.3
The broadly weaker PMI’s continue to put pressure on the ECB and especially Germany showing strong signs of a slowdown in its economy. The Euro eased during the onslaught of the news releases with a current intraday low to 1.23215 while losing ground to the British Pound as well which managed to make some gains, riding on the back of a better than expected services PMI of 58.6, up from 56.2 previously. The current declines in Euro is likely to follow through to tomorrow’s ECB press conference however it is left to be seen how Draghi will make his opening statements considering that the TLTRO2 is just a week away, it is most likely that the ECB will keep its dovish tone into tomorrow’s policy meeting without any concrete measures being implemented in the short term, or at least until January’s meeting. The Euro single currency weakness is also showing signs that the markets are starting to price in the QE announcement within the next few months.
This view is further strengthened by the fact that WTI Crude Oil has started to continue its bullish corrective rally after hitting lows of near the region of $63. A Eurozone quantitative easing program is being seen as an impetus to global crude oil demand.
The current declines in Euro will face the test during the US trading session as the ADP nonfarm employment change data is due which is expected to show that the US economy added 224k private jobs besides the PMI services and non-manufacturing PMI data on the tap. The next level for the EURUSD comes in at the support level of 1.22467. If this level holds, we could possibly see a rally back to 1.237 levels or a break of the support at 1.22467 could pave way for further declines to 1.2085.