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What’s happening: The euro fell versus the US dollar on Monday, as investors assessed business activity data from the Eurozone.
What happened: The soft data from the Eurozone increased speculations of further interest rate cuts by the European Central Bank.
The greenback edged higher on Monday following the release of PMI data from the US.
Why it matters: Data compiled by S&P Global showed business activity in the Eurozone eased in September amid a further contraction in manufacturing activity.
The HCOB Eurozone manufacturing PMI fell to 44.8 in September from 45.8 in the previous month. This marked the steepest decline in 2024. Eurozone’s services PMI declined to 50.5 in September, from 52.9 in August, missing market expectations of 52.1. The Eurozone composite PMI declined for a fourth straight month to a reading of 48.9 in September, hitting the weakest level since January.
France’s composite PMI slipped into the contraction zone, declining to 47.4 in September, from 53.1 in the previous month. Germany’s composite PMI fell for a fourth consecutive month to a reading of 47.2 in September.
The disappointing PMI data from the Eurozone raised speculations of the ECB announcing another rate cut of at least 25 bps during its meeting next month.
In contrast, business activity in the US came in steady during September. The S&P Global flash US composite PMI slipped to 54.4 in September, versus 54.6 in the previous month, while manufacturing PMI dipped to 47 in September, from 47.9 in August.
The European Central Bank had cut its benchmark interest rate by 25 bps earlier in September, while policymakers signalled further rate cuts ahead amid an easing in inflation and pressure on the bloc’s economic growth.
Last week, the US Federal Reserve had lowered its benchmark interest rate by 50 bps.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.1% to 100.85 on Monday, after surging as high as 101.23 earlier during the session.
The EUR/USD forex pair fell around 0.4% to 1.1113 on Monday, recording its biggest one-day decline since September 9.
What to watch: With no major economic data releases scheduled from the Eurozone today, investors will watch announcements by the US.
Data on economic sentiment, consumer confidence and services sentiment from the Eurozone will be released later during the week.
Context: British stock markets recorded gains on Monday, following the release of domestic PMI data.
Details: Data released on Monday showed the S&P Global UK composite PMI declined to 52.9 in September, from 53.8 in the previous month. The figure also fell short of market estimates of 53.5.
UK’s manufacturing PMI declined to 51.5 in September, from a reading of 52.5 in August, signalling slower growth in the region’s manufacturing activity. The country’s services PMI slipped to 52.8, from 53.7 in the previous month. However, the slowdown in growth in the UK was less severe than in Eurozone.
The CBI (Confederation of British Industry) monthly net balance of new orders tumbled to a reading of -35 in September, falling to the weakest level in 10 months.
The Bank of England’s Monetary Policy Committee voted 8-1 to keep interest rates unchanged at 5% last Thursday.
London’s FTSE 100 gained 0.36% to settle at 8,259.71 on Monday, after recording sharp losses last week. The FTSE 250 Index rose 0.06% to close at 20,845.12.
What to watch: Data on car production and CBI distributive trades from the UK will be released later during the week. UK car production, which declined 14.4% year-over-year to 65,478 units in July, is expected to fall by 9.2% in August.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.15%, 0.28% and 0.31%, respectively.
Ukrainian President Volodymyr Zelenskyy is on a visit to the US to rally support for the country and secure approval for longer-range weapons in its war with Russia. The news sent the RUB/USD pair lower in forex trading this morning.
Japan’s au Jibun Flash Bank composite PMI declined to 52.5 in September, from a reading of 52.9 in August, exerting pressure on the JPY/USD forex pair.
South Korea’s producer inflation slowed to 1.6% year-over-year in August, from 2.6% in July, sending the KRW/USD pair slightly lower in forex trading this morning.
Poland’s retail sales grew by 2.6% year-over-year in August, slowing from a 4.4% increase in the previous month. The figure coming in below market estimates of 3.4% exerted pressure on the PLN/USD forex pair.
Taiwan’s unemployment rate increased to 3.36% in August, from 3.34% in the previous month, which sent the TWD/USD pair lower in forex trading this morning.
Turkey’s business confidence, capacity utilization and tourist arrivals, Germany’s Ifo business climate index, Ifo current conditions and Ifo expectations, Brazil’s FGV consumer confidence and Central Bank of Brazil Copom meeting minutes, Mexico’s mid-month inflation rate, Canada’s manufacturing sales, as well as US Redbook index, Case Shiller home price index, FHFA house price index, Richmond Fed manufacturing index, money supply M2, CB consumer confidence and API crude oil stock change.
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