The Eurozone’s collective economic growth faces significant headwinds at the moment. The Euro against TWI, in correction phase, is consistent with evidence of slowing manufacturing output. Fresh off the printing press as of July 1st, the Manufacturing PMI has reached 48.7. This alarming figure shows that the sector is undergoing a collapse. This is the best PMI reading since January 2023 and a solid beat against expectations of 47.4. This unexpected good news has been dimmed by an alarming trend. The Service PMI is now at 49.7, a fall from 51.0 barely a month ago.
The week started off on shaky ground for the Euro as it was the most overbought currency pair among all others. The EUR/USD pair was on a path to 1.1300 before this development came across the wire. Now, it has bounced back on the downside, stabilizing at about 1.1400 as we publish this update. These increases and decreases reflect an unpredictable market landscape shaped by regional factors and national economic metrics.
Analysts have pointed out that the pair has printed record high RSI values on weekly timeframes since 2018. Short-term traders armed with this knowledge can better appreciate the enormous danger from nasty pullbacks at these lofty heights. It’s a good warning to be very careful with today’s gamified trading techniques.
These recent changes in the international and domestic political landscape surrounding trade relations have made a more complex Eurozone economic environment even more complicated. Tariff wars have escalated ever since the beginning of April. This escalation will likely pave the way for additional shocks across the indices over the next several months. Conditions may favor upside, as events in the United States have played a major role in shaping market sentiment. The dollar continues to attempt a rebound after Fed Chair Jerome Powell removed some heat from U.S. monetary policy, and ex-President Trump extended an olive branch to China for fresh trade talks.
Preliminary PMIs have recently become key market moving indicators for the Euro. They have quickly climbed up the ranks behind only European Central Bank (ECB) decisions in terms of potential volatility. In light of those recent readings we are in a very fragile, tenuous economic environment. Manufacturing is in widespread contraction, and services are rolling over, calling into question any hope of continued robust growth anytime soon.