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Further softness German data series could further undermine the outlook for the EUR. EUR/USD may suffer from dips to 1.10 in the weeks ahead, Rabobank’s FX strategist Jane Foley notes.

Further soft data may undermine the outlook for EUR

“This morning’s flash estimate of German September PMI saw business activity falling at the quickest pace in seven months. According to the survey provider, there was ‘a sharp an accelerated reduction in manufacturing production compounded by a near-stalling of growth in the service sector’.”

“It was also reported that ‘the decline in employment also gathered pace as business expectations turned pessimistic for the first time in a year.’ The latter warning may suggest that wage inflation is set to ease. This may hint at a softening in sticky services sector inflation. Further evidence of cooling in services sector inflation is broadly considered to be necessary to trigger further ECB rate cuts.”

“This morning’s data underpin the importance of this week’s German Sep IFO release. Further softness in this series could further undermine the outlook for the EUR. We continue to see scope for dips to EUR/USD1.10 in the weeks ahead.”

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