Euro drops as investors worry about European economic slowdown
The euro dropped today as investors reacted to weak manufacturing and services PMI data from the Eurozone. According to Markit, the manufacturing PMI declined from 51.8 in July to 51.7 in August. The services PMI fell from 54.7 to 50.1 while the composite PMI fell from 54.9 to 51.6. According to Markit, the weakness was partial because companies are still cautious in their asset allocation. In France, the manufacturing PMI fell to 49.0, while in Germany it increased to 53.0. The euro also declined because of the rising number of coronavirus cases in European countries. In the past few days, countries like Germany, Spain, and France have reported thousands of new cases.
The British pound declined even after some strong economic numbers from the UK. Earlier today, data released by the Office of National Statistics (ONS) showed that retail sales in the UK rose by 3.6% in July from June. The sales rose by 1.4% on a year-on-year basis. They also rose above the pre-pandemic levels. The core retail sales increased by 2.0% on a MoM basis and by 3.1% on an annualised basis. Meanwhile, manufacturing PMI numbers rose to 55.3 while the important services PMI rose to 60.1, its highest level since 2013. The sterling possibly declined because of key disagreements between the EU and the UK in their Brexit negotiations.
The Canadian dollar declined against the US dollar, partly due to the falling crude oil prices. The price of Brent and West Texas Intermediate (WTI) declined by more than 1% due to signs of a global slowdown. The Canadian dollar also reacted to the strong retail sales numbers. According to Statistics Canada, the country’s core retail sales increased by 15.7% in June after rising by 10.6% in the previous month. The headline sales increased by 23.7% in June after rising by 18.7% in the previous month. Other data showed that the new house price index rose by 0.4% in July.
The EUR/USD pair dropped to an intraday low of 1.1781, which is the lowest it has been since August 14. On the four-hour chart, the price is below the 50-day and 100-day exponential moving averages. It is also along the lower line of the ascending channel that is shown in white. Also, it has moved below the Ichimoku cloud, which is a sign that the downward trend may continue falling. If it does, it is likely to continue to test the support at 1.1700.
The GBP/USD pair dropped to an intraday low of 1.3140 after the sixth round of Brexit talks ended without a deal. On the four-hour chart, the price is between the 50-day and 100-day exponential moving averages. Also, the signal and the main line of the MACD have continued to drop. The price is also above the ascending trendline that is shown in white. Therefore, the price is likely to continue falling as bears target this trendline at around 1.3050.
The FTSE 100 index declined to an intraday low of £5,995 because of the disagreements on Brexit. On the four-hour chart, the price is slightly above the 38.2% Fibonacci retracement level. The price is between the lower side and the middle line of the Bollinger Bands. It has also formed a descending channel that is shown in white. Therefore, the index is likely to continue falling as bears target the next support at £5,900.