PMIs Turn Lower Still
The latest round of Eurozone PMIs today highlighted worsening economic conditions in the single customs union. Both services and manufacturing sector readings were seen plunging further into contractionary territory last month. The manufacturing PMI was seen falling to 48.5 from 49.6, below forecasts for a 48.7 reading. Services, meanwhile, was seen falling to 48.9 from 49.8, again, below expectations for a 49.1 reading.
This latest set of readings marks the third straight month of contraction in Eurozone business activity and paints a worrying picture for the ECB. Outside of pandemic-linked downside shocks, the August reading was the worst since 2013, highlighting the severity of the downturn in Europe. With the energy crisis still raging, and the broader impact of the Russia-Ukraine war weighing heavily, the near-term risks appear skewed firmly to the downside for EUR. This view was well reflected in yesterday’s Eurozone consumer confidence reading which hit record lows.
The sell off in EURUSD this week has seen the market breaking down below the .9885 level following the rejection at the latest test of the bear channel from YTD highs. With MACD and RSI both bearish, the focus is on a continuation of the bear channel through .9715 and down towards .9607 next.