…and the euro is on fire! The IHS Markit Flash Eurozone Composite PMI dropped sharply in October, signaling a steep decline in business activity in Germany and across the eurozone. On Wednesday, the EUR/USD currency pair tested significant support levels at 1.1377 and 1.1332, reflecting market apprehension over ongoing economic conditions. Currently, the pair is trading at 1.1430, down 0.09% for the day, highlighting the challenges faced by the euro in light of recent economic data.
The euro’s fall is particularly glaring, given that it indicates a much larger drop in business activity. It marks the first contraction for both Germany and the eurozone since November 2024. This decline was most clearly illustrated in Germany’s Services Purchasing Managers’ Index (PMI) which dropped from 51.0 to 49.7. This figure was below the market expectation of 50.5. It spotlights increasing worry regarding tariffs and general economic stress within the area. Business sentiment has worsened, leading to the drop in new orders. This marked drop is raising alarm amid fears of a recessionary economic environment.
Looking ahead, a lot of market analysts are expecting more weakness in the next few PMI reports. For the Services PMI, they look for a drop from 54.4 to 52.8. Furthermore, the Manufacturing PMI is expected to fall from 50.2 to 49.4. These projections are troubling, as they suggest a protracted slowdown in the pace of economic activity, making investors wary of near-term growth opportunities.
Resistance levels for the EUR/USD pair are at 1.1462 and 1.1507. Such levels may pose a threat to any recovery that the currency’s value might expect. Indeed, the mixed performance of the euro captures better the overall market sentiment which has been risk averse amid the recent developments. This backdrop of uncertainty, particularly surrounding the impact of tariffs and the general state of the economy, has helped to create a shakier picture for the eurozone economy.
Those are serious challenges for the euro.
Respondents’ comments
Market participants are being cautious and keeping a watchful eye on economic signals and the overall sentiment of the market for signs of direction. This latest drop brings to mind the roller coaster nature of today’s currency markets. This instability is most visible during times of economic transition.