Mixed Signals from German PMI Data

• German manufacturing’s PMI dropped to 48.5 in September, missing the 50 mark that was anticipated.
• The Service PMI for Germany saw a significant increase, rising to 52.5, much higher than the expected 49.5.
• EUR/USD is trading close to 1.1800 following these mixed PMI results.

In September, the German manufacturing sector continued its trend of contraction, while the service sector showed signs of recovery. This information was highlighted in a preliminary report released on Tuesday by S&P Global and Hamburg Commercial Bank (HCOB).

The HCOB manufacturing PMI for Germany fell to 48.5 in September, which was below the market forecast of 50 and down from 49.8 the previous month. This represents a four-month low.

On the other hand, the HCOB services PMI improved significantly, moving from 49.3 in August to 52.5 in September. Market expectations had set this reading at 49.5. This figure marks an eight-month high for the services gauge.

When combining the data, the overall index for Germany reached 50.5, which matches August’s figure but is lower than anticipated, showing a major rise from 50.5 to 52.4 as projected. Notably, this is the strongest reading in 16 months.

Market Reaction to the PMI Results

The EUR/USD currency pair has maintained its position amidst these mixed responses from the German PMI data, currently hovering around 1.1800.

Overview of HCOB Germany/Eurozone PMIs

The preliminary purchasing manager index (PMI) data was released for Germany and the Eurozone on Tuesday, with timings set for 07:30 and 08:00 GMT respectively. The HCOB Germany combined PMI is expected to remain stable at 50.5, with production PMI anticipated to rise slightly from 49.8 to 50.0 based on market consensus.

In the Eurozone, the composite PMI is projected to improve to 51.1 in September from 51.0 in August, while manufacturing PMI may increase from 50.7 to 50.9. Service PMI is expected to stay steady at 50.5 for September.

Potential Impact on EUR/USD

An increase in the HCOB manufacturing PMIs could lend support to the EUR/USD pair, particularly as the euro strengthens following the preliminary Eurozone consumer confidence index for September. However, this advantage might be mitigated, given the stronger position of the US dollar amid careful commentary from the Federal Reserve. Traders will also be looking out for the preliminary reading of the US S&P Global PMI report later in the day, alongside insights from Federal Reserve Chair Jerome Powell.

Currently, the EUR/USD pair is trading around a key psychological level of 1.1800, having gained 0.5% in the last session. With the 14-day relative strength index (RSI) above 50, there’s a bullish tendency, leading the pair to potentially explore the 1.1918 area, its highest since June 2021, marked on September 17.

On the downside, initial support can be found at the nine-day exponential moving average (EMA) of 1.1776. A drop below that could weaken short-term momentum, pushing the EUR/USD towards the 50-day EMA at around 1.1677.

Economic Indicators

The HCOB Manufacturing PMI, part of the larger S&P Global group, measures key metrics within the Eurozone manufacturing sector. This data is gathered from a survey of top executives in the industry, reflecting changes from the previous month. Typically, readings above 50 indicate growth, while below that suggests a contraction.