EUR/USD climbs to 3-week high as US election looms

The euro has started the week with strong gains. In the North American session, EUR/USD is trading at 1.0890, up 0.55 % on the day. Earlier, the euro rose as high as 1.0914, its highest level since Oct. 15.

Soft PMIs, Investor confidence reflect weak eurozone economy

Germany and the eurozone released Manufacturing PMIs for October today and the picture is not pretty. The German PMI was revised higher to 43.0 from 42.6, following the 40.6 reading in September which was a 12-month low. The Eurozone PMI wasn’t much better, rising to 46.0 from 45.0, just above the market estimate of 45.9. Manufacturing in both Germany and the eurozone have been in a prolonged contraction since June 2022 and there is no sign that things will improve anytime soon.

Investors remain pessimistic about the outlook for the eurozone economy. The Sentix investor confidence index eased its decline to -12.8 in October, compared to -13.8 in September and within expectations. This was a four-month high but investors remain worried about the weak eurozone economy. Germany, the bloc’s long-time locomotive, has been struggling and the coalition government is the midst of a crisis over economic policy ahead of the 2025 budget.

There are no US releases on Monday, which in any event would have been overshadowed by Tuesday’s US presidential election. The outcome is too close to call and the political uncertainty could translate in volatility in the financial markets. With the votes in some swing states expected to be very close, we are likely to see recounts and even court challenges, which means that the election outcome won’t be determined for days or even weeks. The election will be followed by the Federal Reserve rate decision on Thursday, with the markets pricing in a 25-bp cut at close to 100%.

EUR/USD Technical

• EUR/USD is testing resistance at 1.0883. Above, there is resistance at 1.0931
• 1.0857 and 1.0809 are the next support levels

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