EUR/USD has found support near 1.0760, rebounding slightly even as Eurozone business activity continues to weaken. The preliminary Hamburg Commercial Bank (HCOB) Composite Purchasing Managers Index (PMI) for October showed a modest improvement to 49.7 from 49.6 in September, but it remains below the critical 50 mark, indicating continued contraction in the economy. While the manufacturing sector is declining, the service sector is experiencing only slight growth.
Dr. Cyrus de la Rubia, Chief Economist at HCOB, noted that the Eurozone economy is in a challenging position, with mixed performance across member states. Weak business confidence, falling orders, modest input price increases, and workforce reductions suggest a need for economic stimulus, which may lead to further interest rate cuts by the European Central Bank (ECB).
Traders are anticipating additional rate cuts from the ECB in December, with speculation around the potential for a larger-than-usual cut. ECB policymaker Mario Centeno mentioned that a 50 basis point cut is a possibility, highlighting growing downside risks to growth. The recent correction in the US dollar has also contributed to the slight recovery in EUR/USD.
