- The pair may drop to 1.10 if the Eurozone PMIs, due later this week, actuate growth concerns.
- German finance ministry expects manufacturing to remain subdued.
- On Sunday, ECB’s Knot voiced concerns over weak inflation.
EUR/USD hit a 2.5-week low of 1.1153 in Asia and could drop to the psychological level of 1.10 in the near-term if the Eurozone preliminary PMIs, due this Thursday, miss expectations, accentuating growth concerns.
The news hit the wires last week that the US President Trump is considering delaying the decision on auto imports tariffs by six months.
The EUR, however, failed to pick up a bid and registered losses on each of the previous five trading days. The inability to cheer the tariffs news indicates the concerns about the future economic activity are extremely elevated, as stated by BK Asset Management’s Kathy Lien.
These concerns would be bolstered, sending EUR/USD down to 1.10, if the widely tracked Eurozone and German preliminary Purchasing Managers’ indices, scheduled for release, this Thursday, miss estimates. The German Markit Manufacturing PMI (May) is forecasted to rise slightly to 45.0 from the previous month’s print of 44.4.
As for today, the shared currency will likely remain on the defensive, as the German finance ministry’s monthly report released over the weekend said the external risks for the economy remain high and so the manufacturing outlook is likely to remain subdued.
Further, European Central Bank (ECB) policymaker Klass Knot one Sunday said that inflation is not at the level the central bank wants it to be and the only thing the bank can do is to keep the pressure up, to make sure the economy performs at high levels of capacity.
The EUR/USD pair, however, may pick up a bid in the North American session if Fed’s Powell, scheduled to speak at 23:00 GMT, sounds dovish, leading to broad-based USD weakness.