Euro Weakens as Eurozone Business Activity Weakens
The euro (EUR) traded slightly lower against the US dollar (USD) on Thursday (May 21st), having moved within a relatively stable range in recent days, trading at 1.1615 at the time of writing. Weak Eurozone business activity data failed to support the common currency, while modest hopes for an Iran peace deal curbed excessive US dollar gains.
The preliminary HCOB Purchasing Managers' Index (PMI) for May showed Eurozone service sector activity fell to a 63-month low of 46.4 from 47.6 in April, below the expected increase to 47.7. Manufacturing activity slowed to 51.4 from 52.2 previously, also below expectations of 51.9. German PMI data was also negative, with both the manufacturing and service sectors contracting.
These PMI results underscore the negative impact of the energy shock on the Eurozone economy and indicate sluggish Gross Domestic Product (GDP) growth in the second quarter. This data also presents a challenge for the European Central Bank (ECB) in setting monetary policy amid high inflation and weakening economic activity.
Meanwhile, the US dollar's rally stalled after US President Donald Trump stated that peace negotiations with Iran were in their final stages, sparking moderate optimism. This partially counteracted the positive impact on the USD from the hawkish minutes of the Federal Reserve's April meeting.
The next focus will be on the preliminary US PMI data for May, which is expected to show a mild slowdown in the manufacturing sector, while both sectors are expected to continue showing healthy growth.
Variables to monitor include the final revised PMIs in the Eurozone and the US, ECB policy moves, and developments in the Iran negotiations, which influence global sentiment. (arl)
Source: Newsmaker.id
