- EUR/USD rises on risk appetite, despite rising tensions between the US and China.
- US manufacturing PMI remains in expansion territory, although new orders fall.
- Eurozone PMIs remain in contraction zone, while German retail sales slump.
The EUR/USD advances for the fourth day in a row, amid an upbeat environment, as investors shrug off US-China tensions emerging as US House Speaker Pelosi visits Asia. According to the Chinese authorities, a visit to Taiwan would deteriorate relations between the United States and China. The US Manufacturing PMI showed signs of slowing, although the ISM indicator beat expectations, keeping EUR/USD in the lead as the USD weakens.
EUR/USD is trading at 1.0272 having hit a daily low at 1.0205, although it rose strongly towards its daily high at 1.0274, but has stabilized around current levels as buyers look to challenge 1.0300.
EUR/USD is positive on sentiment and expectations of a “less aggressive” Fed
During the New York session, the US manufacturing PMI rose by 52.8, above estimates of 52.0, though still down from the previous reading of 53. What is noteworthy is that new orders continue to decline, going from 49.2 in the last month to 48.0 in July. According to Timothy Fiore, chairman of the ISM Manufacturing Survey Committee, “Panelists are now expressing concern about the weakening economy, as new order rates contracted for a second month amid growing anxiety about the glut.” of inventories in the supply chain.
Meanwhile, during the European session, German retail sales suffered the biggest drop since 1994, to 8.8% yoy. Additionally, the S&P Global Manufacturing PMIs for the bloc, Germany and France remain in contraction territory, fueling speculation of an impending recession in the Eurozone. However, the unemployment rate remained stable, illustrating the rigidity of the labor market.
Statements were made by some Fed officials over the weekend, led by Minnesota Fed President Neil Kashkari. He said he was surprised by the market reaction that the Fed would soon start to slow rates, while adding that higher core inflation readings would push him to support another 75 basis point hike.
On the other hand, the dollar continues its downward path and loses 0.48%, standing at 105,325, undermined by the fall in US Treasury yields. The yield on US 10-year Treasury bonds is trading at 2.595%, down six basis points. These factors have favored EUR/USD, which is trading at two-week highs.
What must be considered
The economic agenda for the Eurozone will include consumer confidence in Spain. In the US, JOLTs job openings will be published, and the Fed will speak with Chicago Fed President Charles Evans.
Technical levels
Source: Fx Street
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