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Euro US Dollar (EUR/USD) Exchange Rate Left Flat as German Technical Recession ‘All But Confirmed’


Euro US Dollar (EUR/USD) Exchange Rate Muted as German Services PMI Slides to Three-Year Low

The Euro US Dollar (EUR/USD) exchange rate was left muted and the pairing is currently trading at around $1.0955.

The Euro was left under pressure as Germany saw its services PMI slide to its lowest level in three years, posting at 51.4 in September, down from 54.8 in August.

While the pace of German service sector growth creation remains resilient, the data revealed that business activity grew at its weakest pace in three years.

Added to this, this dragged the German PMI composite below the 50 no-change mark to 48.5.

This was the first time the composite fell below this mark since April 2013, with the rate of contraction the sharpest in almost seven years.

Commenting on this morning’s data, Markit’s Principal Economist, Phil Smith noted:

‘The slowdown in the service sector in September was even worse than first feared, with the final results showing the weakest business activity growth for three years. A technical recession now looks to be all but confirmed.

‘It isn’t all bad news, with the latest data showing overall price pressures continuing to ease and still-solid job creation in the service sector, which should help maintain a degree of resilience in consumer spending. The worry is, though, that staff shedding across manufacturing could soon outweigh the employment growth in the service sector.’

Subdued Employment Growth Leaves US Dollar (USD) Flat

The US Dollar edged lower overnight following the release of ADP employment change data.

In the latest indicator that the US-China trade dispute is putting pressure on the US economy, data revealed that hiring by private employers cooled.

ADP showed 135,000 jobs were added to the economy in September, but August’s figure was downwardly revised to 157,000 from 195,000 positions.

The ‘Greenback’ was left under pressure as this report comes ahead of the more comprehensive non-farm payrolls report.

Commenting on this, FXTM market analyst, Han Tan noted:

‘Markets are beginning to look at the US economy with a bit more concern.

‘The fear now is that the manufacturing slowdown in the global economy is feeding back into the US as well.

‘Bigger alarm bells would sound off if we started to see a bigger slowdown from US consumers.’

US Hits Europe with 25% Tariffs on Cheese, Wine and Whisky

On Wednesday, the United States said as punishment for illegal aircraft subsidies it would hit European-made Airbus with 10% tariffs and 25% tariffs on cheese, French wine and Scotch and Irish whiskies.

In a statement, US Trade Representative Robert Lighthizer said:

‘Finally, after 15 years of litigation, the WTO [World Trade Organization] has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies.

‘We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers.’

This news came shortly after Italian Foreign Minister Luigi Di Maio expressed concern over the prospect of US tariffs on Italian exports which likely weighed on the single currency.

He said that the government would do all it could to defend the interests of Italian exporters in a time when the bloc’s economy is slowing.

Speaking at a news conference with US Secretary of State, Mike Pompeo, Di Maio stated:

‘The subject of tariffs worried us a lot because we have companies that survive on exports.’

Euro US Dollar Outlook: Will Weak Factory Orders Weigh on USD?

Looking ahead to this afternoon, the US Dollar (USD) is likely to slide against the Euro (EUR) following the release of September’s non-manufacturing PMI.

If ISM reveal the PMI has dropped further than expected in September, it is likely the Dollar will be left weakened.

Meanwhile, the ‘Greenback’ could extend its losses following the release of August’s factory orders data.

If factory orders contract sharply it is likely the Euro US Dollar (EUR/USD) exchange rate will rise.