The euro falls to a seven-day low against the dollar European manufacturing is mired in contraction

September 23, 2019

Frankfurt (Sepy 23)  European session, the euro fell to a seven-day low against the dollar, gold prices resumed from a day low to a seven-day high, just released in Europe a series of manufacturing data malaise, pushed up risk aversion, and put pressure on the euro against the dollar, pushing up gold prices.

During the European session on Monday, the euro fell to a seven-day low against the dollar, gold prices resumed their rally from day lows to seven-day highs, and a series of manufacturing data just released in Europe were weak, pushing up risk aversion and putting pressure on the euro against the dollar. Gold prices rose, while Germany's sluggish carmakers also weighed on consumer demand for crude oil, which was bad for oil prices, and oil prices fell slightly.

Specific data show that the initial value of Markit manufacturing PMI in France in September actually released 50.3, expected 51.2, the previous value of 51.1.

French manufacturing PMI fell unexpectedly in September, Markit economist Eliot Kerr said, as economic activity in the service sector continued to expand and manufacturing output continued to contract, the PMI gap between manufacturing and services remained in September.

Eliot Kerr said the resilience of the service sector continued to support broader economic growth, while business activity in the service sector grew at its slowest pace since May, suggesting spillover effects of negative sentiment in the manufacturing sector. The continued expansion of spillover effects may affect future economic growth.

In September, the initial value of Markit manufacturing PMI in Germany was actually 41.4, expected to be 44.0, up from 43.5.

Germany's manufacturing sector fell further into contraction in September, Markit economist Phil Smith said, Germany's PMI data again faded, the composite output index hit the lowest level since October 2012, further into a state of contraction, according to the current trend, the economy may not have any growth until the end of 2019.

Phil Smith said the manufacturing data performed badly. Trade frictions, uncertainty in the auto industry and Brexit are messing up the order. Manufacturing in September was the worst performance since the 2009 financial crisis; job creation in Germany has stalled. The decline in new business services for the first time in four and a half years suggests that domestic demand in Germany has begun to worsen.

Figure: past data trend of Markit Manufacturing PMI in Germany

The initial value of Markit manufacturing PMI in the euro area in September actually released 45.60, with a forecast of 47.3, up from 47.

The initial level of manufacturing PMI in the eurozone in September was the lowest since October 2012, and Chris Williamson, an economist at the Markit, said the eurozone economy was close to stagnation as the manufacturing sector showed further signs of contagion to services.

Chris Williamson said the data suggested that GDP growth was likely to be just 0.1 per cent in the third quarter, with economic momentum weakening as the quarter came to an end, while the commodity production sector fared even worse, the biggest decline since 2012, but a worrying trend was for weakness to spread to services, which have slowed to their slowest pace since 2014.

The hourly trend of the euro against the dollar in the day

Gold price hourly chart intra-day trend

Private sector activity in Germany shrank in September for the first time in six and a half years as the manufacturing recession unexpectedly intensified and service sector growth lost momentum, according to a separate survey.

Growing rumours of fiscal stimulus in the eurozone have boosted European bond yields, although not all analysts believe the euro will get a big boost amid fears of a slowdown in global trade and growth. Analysts at Mitsubishi UFJ Financial Group said there was little room for an upside against the dollar.

Weak European data are destined to force the ECB to continue to ease after the leadership transition, which remains bearish for the medium-term outlook for the euro.


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