EUR/USD marches firmly after US PMI clings to expansionary territory

• EUR/USD rises on risk-on mood, despite increasing tensions between the US and China.
• The US ISM Manufacturing PMI stays in expansionary territory, though New Orders dropped.
• Euro area PMIs remain in the contractionary region, while German Retail Sales plunge.

The EUR/USD advances for the fourth consecutive day, amidst an upbeat mood, as investors shrugged off tensions arising as US House Speaker Pelosi visits Asia. According to Chinese authorities, a visit to Taiwan would deteriorate US-China relations. That, a US PMI Manufacturing showing slowing signs, although the ISM beat expectations, keeps the EUR/USD on the front foot, as the greenback weakens.

The EUR/USD is trading at 1.0272 after hitting a daily low at 1.0205, though it climbed sharply towards its daily high at 1.0274 but settled around current levels, as buyers are eyeing a challenge of 1.0300.

EUR/USD positive on sentiment, and expectations of “less aggressive” Fed

During the New York session, the US ISM Manufacturing PMI rose by 52.8, higher than the 52.0 estimations, though it trailed the previous reading at 53. What’s worth noting is that New Orders continue to shrink, from 49.2 in the last month to July 48.0. According to Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee, “Panelists are now expressing concern about a softening in the economy, as new order rates contracted for the second month amid developing anxiety about excess inventory in the supply chain.”

In the meantime, during the European session, German Retail Sales plunged the most since 1994, to 8.8% YoY. Additionally, S&P Global Manufacturing PMIs for the bloc, Germany and France, remain in contractionary territory, fueling speculations of an impending recession in the Eurozone. Nevertheless, the Unemployment rate kept steady, illustrating a tight labor market.

Some Fed officials crossed wires during the weekend, led by Minnesota Fed President Neil Kashkari. He said he was surprised by the markets’ reaction that the Fed would soon begin to slow down the pace of rates, while adding that higher core inflation readings would push him to back up another 75 bps hike.

Elsewhere, the US Dollar continues its downward path, losing 0.48%, at 105.325, undermined by falling US Treasury yields. The US 10-year benchmark note rate is at 2.595%, down six basis points. Those factors bolstered the EUR/USD, trading at fresh two-week highs.

What to watch

The Eurozone economic calendar will feature Consumer Confidence in Spain. On the US front, the docket will feature the JOLTs Job Openings, and Fed speaking with Chicago Fed President Charles Evans will cross the wires.

EUR/USD Key Technical Levels