• Euro fall below 1.05
• German, eurozone manufacturing PMIs remain deep in decline

The euro is sharply lower on Monday. In the North American session, EUR/USD is trading at 1.0495, down 0.75%. The euro continues to struggle and has reeled off 10 straight losing weeks, with EUR/USD sliding some 700 basis points during that time.

German manufacturing firmly in contraction

Germany’s Manufacturing sector continues to struggle. In September, the Manufacturing PMI was revised lower to 39.6 from a preliminary of 39.8, marking a fifteenth straight month of contraction. Demand was weaker across the sector, output declined and manufacturers’ expectations fell.

Eurozone manufacturing is also stuck in a deep decline. Manufacturing PMI confirmed at 43.4 in September, which also was the fifteenth consecutive month of contraction. A reading below the 50 line marks a decline in activity. This all paints a grim picture and I don’t see any relief in the near future for German or Eurozone Manufacturing.

The weak manufacturing numbers are further evidence that the eurozone economy is cooling down and inflation has been easing as well. Friday’s eurozone CPI data was encouraging, with a reading of 4.3% y/y in September, compared to 5.2% in August and below market expectations. Lower energy costs helped fuel the downtrend, but core inflation, which excludes food and energy, also declined, from 5.3% y/y to 4.5% y/y, its lowest level since October 2022.

In the US, manufacturing is also experiencing deep contraction but showed some improvement. The ISM Manufacturing PMI rose to 49.0 in September from 47.6 in August, above the consensus estimate of 47.8. Manufacturing has posted declines for eleven consecutive months. Demand remains weak and the Fed’s tightening has further squeezed manufacturers.

In the US, a host of Fed members will be making public statements and investors will be listening closely for any hints regarding future rate decisions. The Fed rate odds of a quarter-point increase for the November meeting have increased to 31%, up from 18% on Friday, according to the Fed Watch Tool, which means the markets consider a rate hike to be on the table.

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EUR/USD Technical

• EUR/USD tested support at 1.0489 earlier. Below, there is support at 1.0404.
• There is resistance at 1.0572 and 1.0648