Euro stumbles amid slump in Eurozone private sector

The euro faced headwinds on Monday as EUR investors responded to some weaker-than-forecast Eurozone PMI releases.

Meanwhile, the pound is trending broadly higher so far this morning, with GBP/EUR buoyed at €1.1603 and GBP/USD rising to $1.2858. GBP/CAD has ticked up to CA$1.6916, while GBP/AUD dips to AU$1.8991 and GBP/NZD holds steady at NZ$2.0691.

Looking ahead, will the euro extend these losses today if Germany’s IFO business climate index reports another fall in morale?

What’s been happening?

The euro got off to a poor start this week, with the single currency almost immediately facing resistance, following the publication of the Eurozone’s latest PMIs.

July’s preliminary figures showed both the manufacturing and services PMIs missed expectations, triggering a drop in the euro as the bloc’s private sector suffered its largest contraction since November.

The underwhelming figures come just days before the European Central Bank (ECB) delivers its latest interest rate decision, and fuelled speculation the bank is close to the end of its current hiking cycle.

The pound also stumbled on Monday, as the UK’s own PMIs also fell short of expectations. While it avoided a contraction, UK private sector growth slowed to a crawl, sapping Sterling sentiment.

In contrast the US dollar strengthened through yesterday’s session. The ‘greenback’ was largely able to shrug off some mixed US PMIs as demand for the safe-haven currency was bolstered amid a cautious market mood.

What’s coming up?

Turning to today’s session, the most impactful data release looks to be Germany’s latest business climate index.

This could pile more pressure on the euro this morning if it reports that business morale in the Eurozone’s largest economy continued to deteriorate this month.

In the UK, the Confederation of British Industry (CBI) will also publish its latest business optimism indicator this morning. Could a more sanguine outlook for the third quarter help to bolster the pound?

Meanwhile, any movement in the US dollar may be limited today as many USD investors will be reluctant to alter their positions ahead of the Federal Reserve’s interest rate decision on Wednesday.