EUR/USD falls after weak PMIs raise recession worries
- Eurozone composite PMI fell to 48.9 from 51
- US PMI data & Fed speakers are up next
- EUR/USD could be forming a double-top reversal pattern.
EUR/USD is falling as business activity in the region is now contracting, according to the latest PMI data.
With the Olympics well behind us, the August increase in the PMI was met by a sharp decline in September. The composite PMI fell to 48.9, down from 51 in August and below forecasts of 50.6.
When we break these figures down, the services PMI fell from 52.9 to 50.5, while the manufacturing activity contracted at a faster pace, at 44.8. Level 50 separates expansion from contraction.
The data points to a bad end to the quarter, which means that GDP growth is likely to weaken from its 0.3% quarter-on-quarter pace in Q2. Today’s data comes after the ECB lowered its growth forecasts for the region in its September meeting and up to the drug you report, which highlighted concerns about weak eurozone activity.
The disastrous eurozone PMI figures signal escalating recession fears, which could see the easy money cut rates at a faster pace to support the economy.
Looking ahead, attention will now turn to US PMI data, which is expected to show that US manufacturing activity contracted at a slower pace of 48.5 versus 47.9 previously. Still, US services are expected to grow at a slightly slower pace at 55.3, down from 55.7. Investors will also be watching a slew of central bank speakers who could provide more information on why the Fed voted to cut rates by 50 basis points last week.
EUR/USD forecast – technical analysis
EUR/USD has been trending higher since April, forming a series of higher highs and lower lows. After reaching a 3-week high of just below 1.12, EUR/USD has corrected lower in what could be a double-top reversal pattern.
The price has found support at 1.11 for now. Sellers will need to take out this support to bring 1.10 into play. A break below 1.10 is needed to create a lower low.
Buyers will need to rise above the 1.12 to create a higher high.
GBP/USD falls after PMIs show slower growth
- UK composite PMI falls to 52.9 from 53.8
- UK services inflation cooled to its lowest level since February 2021
- GBP/USD recovers from support at 1.3265
The pound is falling lower after downbeat UK PMI data in September, which points to signs of growth softening across UK businesses.
UK composite PMI fell slightly to 52.9, down from 53.8, indicating a slight deceleration in overall activity. Delving deeper into the figures, the services PMI slept from 53.7 to 52.8, and the manufacturing PMI is 51.5, down from 52.5. The level 50 separates expansion from contraction.
The data shows that output growth has slowed in both manufacturing services. However, the data is still consistent with GDP growth of around 0.3% in Q3, which aligns with BOE forecasts.
Cooling services inflation, which is now at its lowest level in February 2021, points to progress towards the Bank of England's 2% target level for inflation and makes another rate cut before the end of 2024 possible.
The data comes after the Bank of England left interest rates unchanged last week at 5%, and one that they're in no rush to reduce rates despite the Federal Reserve cutting rates by a bumper 50 basis points.
Looking ahead, attention will now turn to US PMI data as well as several fed speakers for further insight into why the Federal Reserve opted for a 50 basis point cut. Weaker than expected US PMI data or a cautious-sounding Fed could pull the USD lower, lifting GBP USD
GBP/USD forecast – technical analysis
GBP/USD has been in an uptrend since April. The price rose above 1.3265, the August high reaching a 2024 peak of 1.3340. Buyers will look to rise further towards 1.34.
Immediate support can be seen at 1.3265, today’s low, and the August high; a break below here brings the 1.31 round number into focus. However, it would take a break below 1.30 to create a lower low.
