The EUR began this Monday morning after a mixed week in which it fell against a quite buoyant US Dollar but rose against all the other major currencies to take silver medal spot on the league table. On Friday afternoon, it tumbled on Friday after comments from ECB President Draghi sent EUR/USD down to a low of 1.2265; its weakest since Monday, April 9th. Overnight in Asia and this morning in Europe, the EUR failed to bounce in any meaningful way and from a technical perspective, the breakthrough last week’s low opened up a swift move down to 1.2230. If no support is found at current levels, the next downside target will be the March 1st low around 1.2170.
In yet another relatively disappointing piece of economic news, the ‘flash estimate’ of Markit’s Composite Eurozone PMI held steady at 55.2 in April, according survey data based on approximately 80% of final responses. The unchanged reading indicated the joint-weakest expansion of business output since the start of 2017, but remained well above the average of 53.8 seen over the past five years. Manufacturing again led the upturn, albeit with the rate of factory output growth slowing to a 17-month low. Service sector activity meanwhile rose at a rate only marginally faster than March’s seven-month low. Markit’s downbeat Press Release titled “Eurozone economy stays in lower gear” noted, “Output growth across the two sectors has fallen sharply since an 11 ½ year peak at the start of the year, in line with a slowdown in order book growth. Inflows of new orders rose at the weakest rate for 15 months in April. Factories reported the smallest gains in both total goods orders and export orders for a year-and-a half during April, the latter in part dampened by the recent strength of the euro, notably against the US dollar. New business inflows in the service sector meanwhile slipped to an eight-month low, adding to signs of a broad-based waning of demand growth both at home and in export markets.”
On Friday afternoon, President Mario Draghi acknowledged the Eurozone slowdown in a statement at the International Monetary Fund meetings in Washington, but maintained his optimism that the expansion will continue. “Notwithstanding the latest economic indicators, which suggest that the growth cycle may have peaked, the growth momentum is expected to continue.” There is an ECB Council meeting on Thursday this week, which explains why Mr Draghi’s comments on Friday were limited to the economy and made no mention of monetary policy. The EUR opens in North America today at USD1.2235 and EUR/CAD1.5645.