EUR / USD: Eurozone data indicates a likely slowdown in economic growth in the 4th quarter of this year.
Data released in the first half of the day in the euro area, put pressure on the European currency, which did not allow traders to resume an upward trend in risky assets. The data indicates a high probability that the eurozone economy will again begin to show a slowdown in the 4th quarter of this year after the rise observed in the 2nd and 3rd quarters.
According to the report of the Federal Statistics Agency, orders in the manufacturing sector of Germany grew slightly in September of this year compared with August. The increase was due to higher domestic demand. However, a sharp decline was observed from countries outside the monetary union.
According to the data, orders in the manufacturing sector as a whole rose by 0.3% after rising 2.5% in August. Economists had expected orders in September to fall by 0.6% altogether. As I noted above, domestic orders in September rose by 2.8%, while demand from non-eurozone countries dropped by 3.7% at once. Compared to the same period of 2017, orders decreased by 2.2%.
The data on activity in the Eurozone services sector also failed to support the euro. A sharp decline in Germany and Italy led to a fall in the overall index in the eurozone.
According to the report, the PMI Purchasing Managers Index for Germany in October of this year showed a slowdown in growth and amounted to 54.7 points against 55.9 points in September. Economists had forecast that PMI for Germany’s service sector would be at 53.6 points.
In Italy, the activity in the services sector also fell sharply. According to Markit, the PMI Purchasing Managers Index fell below 50 points, indicating a decline in activity. The report indicates that in October it was 49.2 points against 53.3 points in September.
The activity in the Eurozone services sector in October turned out to be slightly higher than expected, but there is little to be happy about. According to IHS Markit, the PMI Purchasing Managers Index for the Eurozone services sector in October 2018 was 53.7 points against 54.7 points in September of this year. Growth in business activity at such a slow pace could lead to a possible slowdown in economic growth in the 4th quarter.
As for the technical picture of the EUR / USD currency pair, it remained almost unchanged. The breakthrough of the resistance level of 1.1420 will strengthen the presence of euro buyers, which will lead to the resumption of an uptrend with the updating of the resistance levels of 1.1450 and 1.1480. In the case of a decline below the support level of 1.1390, the pressure on the euro may increase significantly, which will lead to a larger downward trend with a return to the lows of last month in the area of 1.1300.
The Australian dollar ignored the decision of the Reserve Bank of Australia, which kept interest rates unchanged at 1.5%, where it has been located for more than two years.
The RBA said that low interest rates still support the economy, and maintaining rates at the same level will correspond to stable GDP growth rates. Also, the current level of interest rates will allow over time to reach the target level of inflation.
The RBA believes that the prospects for the labor market remain positive, and they expect unemployment to decline to about 4.75% in 2020.
Economists of the bank revised their forecasts for GDP growth in 2018–2019 upwards to 3.5%.