EUR/USD has paused in the Friday session, after posting strong gains on Thursday. Currently, the pair is trading at 1.1772, down 0.05% on the day. On the release front, German and eurozone manufacturing PMIs disappointed, missing their estimates. There are no major U.S events on the schedule.
German and eurozone manufacturing PMIs were soft in September. The German indicator dropped sharply, from 56.1 to 53.7, missing the estimate of 55.7 points. This marked the weakest reading since August 2016. It was a similar story from eurozone manufacturing PMI, which fell from 54.6 to 53.3, the lowest level since October 2016. This marked the ninth straight month that the indicator has weakened – in December 2016, the indicator stood at 60.6 points. There was better news from services PMIs. German Flash Final Services PMI rose to 56.5, above the estimate of 55.1 points. The eurozone release improved to 54.7, above the estimate of 54.5 points.
The US-China trade war is heating up, with the two economic giants exchanging tariffs this week. On Monday, U.S President Trump announced 10% tariffs on some $200 billion worth of Chinese goods. China quickly responded, slapping 10% tariffs on $60 billion in US exports. These tit-for-tit tariffs have become a familiar script, only this time investors haven’t panicked and snapped up U.S dollars. Investors are somewhat relieved that the tariffs are just 10%, and China is taking measures to reduce the effect of the tariffs on its economy, including increasing stimulus and infrastructure spending. Global growth remains strong, despite the tariff spat. However, China has also threatened to cancel upcoming trade talks with the U.S, in protest of the recent U.S tariff.