EUR/USD is higher in the Friday session, after posting sharp gains on Thursday. Currently, the pair is trading at 1.1441, up 0.29% on the day. On the release front, German and eurozone manufacturing PMIs softened in October, but were within expectations. In the U.S, the focus is on employment data for October. Nonfarm payrolls are expected to climb sharply to 194 thousand, but wage growth is forecast to ease to 0.2%. The unemployment rate is expected to remain pegged at 3.7%.
The German manufacturing sector slowed for a third straight month in October, as the slowdown has now entered the fourth quarter. The October Manufacturing PMI dipped to 52.2, down from 53.7 points in September. The reading, which points to limited expansion, is the lowest since May 2016. The weak data can be directly attributed to global trade tensions, which have dampened the German export sector. China is Germany’s third largest export market, and a slowdown in China due to U.S trade tariffs could have a chilling effect on the German economy. The German central bank is forecasting zero growth in the third quarter, and growth in the eurozone also softened in the third quarter. Eurozone GDP posted a weak gain of 0.2% in the third quarter, down from the 0.4% gain in the second quarter. On an annualized basis, eurozone growth slipped to 1.7% in Q3, down from 2.1% in Q2.
Eurozone inflation is expected to rise in October. CPI Flash Estimate ticked higher from 2.1% to 2.2% and Core CPI Flash Estimate rose to 1.1%, up from 0.9%. Both of these readings matched the forecasts. The stronger inflation numbers back up ECB President Mario Draghi’s stance that inflation is showing a “relatively vigorous pick-up”. Higher oil prices are one reason behind stronger inflation numbers. Germany, the bellwether for the rest of the eurozone, is also experiencing higher inflation, which climbed 2.4% in October.
