Euro remains near seven-week highs after downwardly revised Eurozone Manufacturing PMI

• EUR/USD steadies at the 1.1525 area after pulling back from seven-week highs at 1.1556.
• Erozone HCOB Manufacturing PMI has been revised down but is still showing a moderate expansion in July.
• The Euro is drawing support from risk appetite, as hostilities halted in Iran and Trump hinted at a new round of negotiations.

The Euro (EUR) posts moderate losses against the US Dollar (USD) on Monday, trading at 1.1525 at the time of writing, but standing close to the seven-week highs, at 1.1556 hit earlier on the day. Final Eurozone Purchasing Managers Index (PMI) figures confirmed a moderate expansion of the sector's activity in July, while hopes of new peace talks between the US and Iran are providing additional support to the Euro.

Eurozone’s final HCOB Manufacturing PMI has been revised down to 51.9 in July from previous estimations of 52.0. This is still a moderate improvement from June’s 51.4 reading and its best performance since April, which suggests that the region’s factory activity is showing resilience to the energy shock and the uncertainty from Iran’s war.

Down to member Spain’s and Italy’s HCOB Manufacturing PMIs have shown moderate expansion in July, yet short of the levels anticipated by the market’s consensus. German Manufacturing PMI has shown a significant improvement, while French manufacturing activity contracted against expectations.

Before that, German Retail Sales disappointed, showing a 1.1% fall in June, more than twice the 0.5% decline forecasted by market analysts, and it could have been much worse if it were not for the 2.1% rise in petrol station sales. These figures follow a 1.2% increase in May.

Risk appetite, lower Oil prices are Euro-supportive

The Euro is drawing some support from a moderate risk-on mood and lower Oil prices, as hostilities in the Middle East were halted and US President Donald Trump affirmed that negotiations with Tehran will begin on Monday. Iran’s Foreign Ministry Spokesperson Esmail Baghaei, however, has denied any talks with the US regarding Hormuz, a vital sea corridor for global crude supplies.

Analysts at ING argue that EUR/USD “should probably be doing better,” pointing to “decent Eurozone hard data last week, lower oil prices and lots of Dollar selling from Japan” as supportive factors. Looking forward, however, they doubt that “such news will have any lasting impact on the Euro.”

The experts at ING assess that the bigger and more lasting driver of the EUR/USD trend is the Fed’s September decision, noting that this “remains unresolved,” and that US data this week will determine whether the pair ends the week “pressing 1.1615/20 resistance or trading back below 1.15.”