EUR/USD rebounds above parity on dire US PMIs
Philip McHugh August 24th 2022 - 2 minute read
The US dollar came under heavy selling pressure on Tuesday, following the publication of some abysmal US PMIs.
Meanwhile, the pound is trading in a narrow range, with GBP/EUR stable at €1.1879 and GBP/USD flat at $1.1826. GBP/CAD is rangebound at C$1.5347, while GBP/AUD and GBP/NZD hold steady at AU$1.7101 and NZ$1.9083, respectively.
Looking ahead, will a slowdown in US durable goods order place additional pressure on USD exchange rates today?
What’s been happening?
The US dollar nosedived yesterday, with the release of the latest US PMI figures.
Preliminary figures from S&P Global reported growth in the US service sector fell off a cliff this month, with August’s services index plummeting from 47.3 to 44.1. This was well below the 49.2 forecast and was the weakest reading since May 2020.
This slump in the US dollar allowed the EUR/USD exchange rate to climb back above parity.
However the euro struggled to replicate this success against the majority of its other peers after the Eurozone’s PMIs confirmed private sector activity in the bloc also contracted this month.
The UK’s own PMIs proved to be a bit of a mixed bag. While growth in the service sector proved more robust than expected, this was undermined by a surprise contraction in the manufacturing sector.
Despite this the pound was still able to close the European trading session with modest gains against most of its peers.
What’s coming up?
The only data release of note today will be the publication of the latest US durable goods orders.
July’s figures are expected to report the pace of order growth slowed from 1.9% to 0.6%, potentially exerting some pressure on the US dollar.
However the downside potential of the ‘greenback’ may prove limited, with USD investors likely to be reluctant to make any aggressive moves ahead of the Federal Reserve’s annual Jackson Hole Symposium in the latter half of the week.
Meanwhile the euro may remain on the defensive today, assuming that European energy concerns remain entrenched.
In the absence of any impactful UK data, the pound could struggle to find support today, with domestic political uncertainty, widespread industrial action and an increasingly bleak economic outlook likely to act as headwinds for Sterling.