- The euro made a slight gain against the US dollar on Tuesday, even as investor sentiment remained cautious and momentum weakened.
- Recent US data offers a mixed view: while the S&P Global PMIs indicate resilience, the ISM services PMI shows a drop, highlighting concerns in employment and new orders.
- In the eurozone, although final PMI readings were generally disappointing, signs of stabilization in Germany provided some relief.
On Tuesday, the euro (EUR) stood at about 1.1575 against the US dollar (USD), reflecting a cautious atmosphere and subdued macroeconomic indicators. Some lukewarm growth indicators from the eurozone mixed with soft data from the US kept both buyers and sellers from making strong moves, leading to price constraints.
The euro/dollar pair had a notable recovery last Friday after a disappointing US non-farm payroll report rekindled doubts about the Federal Reserve’s plans and pressured the dollar. Still, follow-up buying has been limited, with 1.1600 acting as a significant resistance point, while 1.1500 holds firm as support.
Meanwhile, the US Dollar Index (DXY), which assesses the dollar against a basket of six major currencies, has shown minor fluctuations but remains stable above the 98.50 level. Currently, it hovers around 98.70.
The latest US data, released on Tuesday, painted a mixed picture of the service industry. The S&P Global Services Purchasing Managers Index (PMI) for July slightly exceeded expectations, coming in at 55.7, while the overall PMI rose from 54.6 to 55.1. In contrast, the ISM Services PMI fell short, dropping to 50.1 from a forecast of 51.5. This decline was particularly apparent in new orders and employment, with the employment index sinking from 47.2 to 46.4 and new orders sliding from 51.3 to 50.3. Additionally, cost pressures increased, shown by a rise in prices from 67.5 to 69.9, underscoring persistent inflation worries amid a broader slowdown.
Across the ocean, eurozone PMI statistics from S&P Global and Hamburg Commercial Bank (HCOB) were softer than anticipated, intensifying worries about growth prospects in the region. The HCOB Eurozone Composite PMI for July was released at 50.9, missing the predicted 51.0 and down from 51.0 in June. Similarly, the service PMI decreased to 51.0, falling short of both the expected 51.2 and prior readings.
However, Germany surprised some with its data. The composite PMI increased to 50.6, surpassing both the previous figure of 50.3 and the 50.4 forecast. The service PMI also improved slightly from 50.1 to 50.6, indicating gradual momentum in Europe’s largest economy, despite still being somewhat fragile.
In other news, the latest Eurozone Producer Price Index (PPI) for June displayed a noticeable rebound, providing some offset to weak PMI results. The monthly PPI rose by 0.8%, a significant improvement from the -0.6% drop in May. Year-over-year, the PPI showed a 0.6% increase, slightly above the anticipated 0.5%, rising from 0.3% previously.
Looking ahead, the outlook for the euro appears tenuous, especially given escalating concerns regarding the newly introduced US-EU trade framework. The European Commission’s Vice President, Malossyvchovich, confirmed on Tuesday that discussions were underway with US officials Lutonic and Greer to implement the interim trade framework. However, EU representatives expressed that rejecting the agreement could lead to increased tensions and sudden tariffs from both parties. Adding to these risks, President Donald Trump has threatened a 35% tariff on EU goods if the bloc fails to meet its obligations under the deal. This aggressive stance raises concerns about potential trade vulnerabilities for the eurozone, further complicating the dynamics of the EUR/USD exchange rate.
