German HCOB Composite PMI surprisingly expands sharply to 53.8 in October
According to flash estimates, the Composite Purchasing Managers' Index (PMI) in the German economy surprisingly expanded at a robust pace to 53.8 in October, from 52.0 in September. Economists had already anticipated the overall business activity to have grown again; however, the pace was expected to be moderate.
Strong growth in the services sector activity has seldom contributed to a significant increase in the Composite PMI. The Services PMI came in at 54.5, higher than the prior release of 51.5. Meanwhile, the Manufacturing PMI has declined again, ticking higher to 49.6 from the estimates and the former reading of 49.5.
“This is an unexpectedly good start to the final quarter. Activity in the service sector has increased significantly, and manufacturing output has risen for the eighth consecutive month. This means that the economy as a whole is also showing accelerated growth," Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said, and added, "It is encouraging to see that new orders in the manufacturing sector have risen again slightly after a dip in the previous month. New business in the service sector has even received a real boost. Basically, these are good conditions for growth in the fourth quarter. However, the fact that the outlook for the future is more cautious than in the previous month, both among service providers and in industry, shows that the economic situation remains fragile."
Market Reaction
EUR/USD has attracted significant bids after the release of the unexpectedly strong flash German PMI figures for September, rising to near 1.1630. Meanwhile, investors brace for more action in the major currency pair as the Eurozone PMI is due to be released at 08:00 GMT.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.05% | -0.00% | 0.17% | 0.09% | 0.08% | -0.05% | -0.02% | |
| EUR | 0.05% | 0.05% | 0.25% | 0.15% | 0.13% | -0.00% | 0.03% | |
| GBP | 0.00% | -0.05% | 0.18% | 0.10% | 0.08% | -0.06% | -0.02% | |
| JPY | -0.17% | -0.25% | -0.18% | -0.08% | -0.10% | -0.23% | -0.20% | |
| CAD | -0.09% | -0.15% | -0.10% | 0.08% | -0.03% | -0.15% | -0.13% | |
| AUD | -0.08% | -0.13% | -0.08% | 0.10% | 0.03% | -0.14% | -0.10% | |
| NZD | 0.05% | 0.00% | 0.06% | 0.23% | 0.15% | 0.14% | 0.03% | |
| CHF | 0.02% | -0.03% | 0.02% | 0.20% | 0.13% | 0.10% | -0.03% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
This section below was published at 05:50 GMT to cover the preliminary September HCOB PMI data from Germany.
German/ Eurozone flash PMIs Overview
The preliminary German and Eurozone flash HCOB Purchasing Managers’ Index (PMI) data for October is due for release today at 07:30 and 08:00 GMT, respectively.
Amongst the Euro area economies, the German and the composite Eurozone PMI reports hold more relevance, in terms of their impact on the European currency and the related markets as well.
The flash Composite PMI for Germany is expected to have dropped to 51.6 from 52.0 in September. Moderate growth in the service sector activity and the continued contraction in the manufacturing sector are expected to have weighed on the overall business growth. The Services PMI is seen falling to 51.0 from the prior reading of 51.5. Meanwhile, the Manufacturing PMI is estimated to have declined at a steady pace to 49.5.
The forecast for the Eurozone flash Composite PMI shows that it dropped to 51.0 from 51.2 in September. The Services PMI is expected to have expanded, but at a moderate pace to 51.1, with the Manufacturing PMI declining at a faster pace to 49.5.
How could German/ Eurozone flash PMIs affect EUR/USD?
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EUR/USD demonstrates a sideways trend amid a Symmetrical Triangle chart pattern formation. The upward border of the above-mentioned chart pattern is placed from the September 17 high around 1.1920, while the downward border is plotted from the August low near 1.1390.
The major currency pair trades close to the 20-day Exponential Moving Average (EMA) from the past few trading weeks, suggesting indecisiveness among investors.
The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating a sharp volatility contraction.
Looking up, the EUR/USD pair could revisit its four-year high around 1.1920 if it breaks above the October 17 high of 1.1728. On the downside, the August low around 1.1400 will be the key support zone for the pair in case the pair slides below the October 9 low of 1.1542.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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