Euro currency downward spiral continues as deflationary pressures build
The euro currency fell to a fresh 2019 trading low against the U.S Dollar on Monday as data inside the final reading of the August German manufacturing PMI showed deflationary pressures building inside Europe’s largest economy. ECB and German policymakers will be extremely concerned by yesterday’s data, as is showed producer prices falling sharply as supply continued to far outpace demand.
Sustained deflationary pressures in Germany has the ability to transfer across to the core and periphery of Europe, something that the ECB will be closely monitoring as it prepares new policy measures, ahead of next weeks key ECB meeting. The German manufacturing PMI headline number held close to its weakest level in seven-years, dashing any hopes of a recovery any time soon.
German manufacturing output also fell to a record low last month, as overseas demand and domestic demand for German-made goods tumbled. Increased unemployment in the manufacturing sector was once again reported inside the August PMI report, with job cuts accelerating as the manufacturing recession worsened.
The euro currency continued its recent drop against the U.S dollar as investors combed-through the bearish details of the final reading of the August German manufacturing PMI. At present, the single currency has few reasons to rally, given that growth and inflation prospects inside core eurozone nations are worsening.
Real pressure is now building on the European Central Bank to offer investors something concrete and tangible next week to underpin the entire eurozone economy and fragile European banking sector. A token rate cut from the ECB next Thursday may leave investors unimpressed, particularly with price pressures building in Europe’s flagship economy.
EUR/USD Daily Candlestick Chart | Source: ActivTrader
The EUR/USD pair has very limited technical support below the 1.0900 level, leaving the 1.0880 and 1.0835 areas as the likely bearish targets. Any recovery above the 1.1000 level can expect to find resistance at the 1.1028 and 1.1090 levels.
Written by Nathan Batchelor, External Analyst, ActivTrades
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