Euro Dampened by Weak PMI Data

Economic activity in Europe is cooling, raising the spectre of an emerging recession in Germany and the whole eurozone.

Sunset Market Commentary

Softer-than-expected European October PMIs were a perfect excuse for core bonds to build on yesterday’s remarkable intraday U-turn. In a Germany-led decline, the composite figure dropped from 47.2 to 46.5, more than offsetting the September uptick . Both manufacturing (43.0 from 43.4) and services (47.8 from 48.7) are in contraction territory at the start of 2023Q4.

Will US GDP Stats Exceed Forecasts?

It's been a solid year for the American economy, which has performed well even in the face of sky-high interest rates. Economic growth seems to have accelerated over the summer as consumers continued to spend, supported by a labor market that remains exceptionally strong.

PMIs Signal Growth Divergence Between Euro Area and US

Monetary policy tightening may be materialising in the euro area after yesterday's weaker-than-expected PMI figures. The economic deterioration seems to be broad-based with both the manufacturing and service sector declining. The composite index stood at 46.5 (cons.: 47.4, prior: 47.2).

USD Downside Well Protected Going into ECB

To us, it suggests that the USD downside is well protected going into ECB (Thursday) and Fed (next Wednesday) policy meetings. We see a fair chance that the ECB meeting will produce a dovish skip, while the Fed will end up with a hawkish skip. Unless of course the ECB already introduces additional liquidity-draining measures but we expect those by December at the earliest (ending PEPP reinvestments).

The News Jungle

Gold spike above its 200-DMA defying mountains, and the rising US yields. The yellow metal is a solid hedge against risky assets that get smashed by a severe fall in appetite.

EUR/AUD Potential Short-Term Downside Pressure after Upbeat China Data

China’s trio of key economic data has managed to surpass expectations to the upside where Q3 GDP came in at 4.9% y/y, above consensus estimates of 4/4% but below Q2 print of 6.3% y/y. Growth in retail sales for September rose at the fastest pace in four months; 5.5% y/y accelerated from 4.6% y/y in August and beat expectations of 4.9% y/y.

Cautious Risk Environment Prevents Dollar from Stacking Up Losses

A cautious risk environment prevents the dollar from stacking up losses. EUR/USD 1.064 serves as a first resistance. After yesterday’s wage data UK (core) inflation this morning tops estimates, offering conflicting signals what to expect from the Bank of England in November. Sterling ekes out a tiny gain to EUR/GBP 0.8675.

GBP/USD Analysis: Inflation Stabilises, Pound Rises in Price

UK inflation data was released this morning, showing that consumer price inflation (CPI) held steady at 6.7% in September, although economists had expected 6.6%, which would mean the CPI would continue to decline from its peak of 11.1%, achieved at the end of last year.

Bitcoin and Ethereum Go Their Separate Ways for Now

The picture in the altcoins is less optimistic. Ethereum has been making lower and lower local highs and lows for the past two weeks after coming under increased pressure following a consolidation below the 200-week average, with the 50-week average acting as local resistance. Should the pressure on the cryptocurrency intensify, the $1200 area appears to be the downside target for Ethereum.