Forex News

• Euro remains calm after the release of the German preliminary HCOB PMI data for September.
• German HCOB Composite PMI jumps to 53.8 from 51.8 in August.
• The Fed will likely deliver at least one more interest rate hike this year.

The Euro (EUR) remains almost steady against its major currency peers after the release of the German preliminary HCOB Purchasing Managers’ Index (PMI) data for September.

The PMI report has shown a slowdown in the manufacturing sector output; however, the services sector activity returns to the expansion territory. The Manufacturing PMI arrived at 53.8, lower than 54.5 estimates and the previous reading of 54.3. The Services PMI jumped to 52.9 from 49.7 in August. A figure above 50.0 is considered as expansion in the business activity.

Strong service sector activity led to a significant growth in the overall business activity. The Composite PMI rises to 53.8 from 51.8 in August.

Against the US Dollar (USD), the Euro is down 0.24% to near 1.1420. The major currency pair is under pressure as the US Dollar remains broadly firm, with the Federal Reserve (Fed) being widely anticipated to hike interest rates at least one more time in the remainder of the year.

During press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.23% higher to near 100.77, the highest level seen in over seven weeks.

Fed policymakers continue to warn of persistent inflation risks amid energy shocks and strong demand, advocating the need of more interest rate hikes.

“The risks to inflation outweigh the risks to maximum employment. That's why we raised rates,” Richmond Fed Bank President Thomas Barkin said on Tuesday, Reuters reported. Barkin added, "Will additional hikes be required, and how many? ​We'll see," Barkin said.

EUR/USD Technical Analysis

In the daily chart, EUR/USD trades at 1.1422, keeping a bearish near-term bias as spot holds beneath the 20-period exponential moving average (EMA) at 1.1532. The pair has extended its retreat away from prior highs, and the latest Relative Strength Index (RSI) reading near 29 suggests emerging oversold conditions, hinting that downside momentum could be stretched even as the broader tone remains heavy below the key EMA barrier.

On the topside, initial resistance is located at the 20-period EMA at 1.1532, which caps recovery attempts and defines the first hurdle for any corrective bounce. As long as price trades under this moving average, rallies are likely to be viewed as corrective within a broader bearish phase, while any sustained break above the EMA would be needed to ease immediate pressure and open the way for a more durable rebound.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• WTI Oil flatlines around $89.00, about 13% below last week's highs.
• The increases in Oil exports from Saudi Arabia and Iraq have eased concerns about supply disruptions.
• News reports of negotiations between the US and Iran are boosting hopes of a peace deal.

Oil prices maintain their negative trend on Wednesday, with the price of the US benchmark West Texas Intermediate (WTI) barrel flatlining at the $89.00 area, its lowest level in nearly three weeks and 13% below last week’s highs. News that Saudi Arabia is fixing its East-West pipeline and hopes of a new round of US-Iran peace talks are keeping WTI prices under pressure.

Markets have welcomed reports that Saudi Arabia has restarted operations in a critical pipeline that transports about 4 million barrels of crude per day to the Red Sea port of Yanbu, to avoid the blockade of the Strait of Hormuz.

Beyond that, Iraq’s Oil minister, Basim Mohammed, affirmed on Tuesday that the country has boosted its Oil exports to 3 million barrels per day (bpd) and that he expects to increase exports via Turkey to more than 600K bpd.

Hopes of a US-Iran peace deal remain alive

The highlight this week is the United Nations (UN) General Assembly held in New York. US President Donald Trump suggested that he is open to meet its Iranian counterpart, Masoud Pezeshkian at the event, which boosted hopes that the rival countries might engage in a new attempt to negotiate the end of the conflict.

Tehran offered a deal to reopen the Strait of Hormuz in seven days if the US lifted its blockade on Iranian ports, which has not been answered by the US. The US Special Envoy, Steve Wickoff, however, has confirmed that there are negotiations going on the sidelines of the UN summit, although no relevant progress has been reported so far.

Trump on the other hand, soured sentiment somewhat on Tuesday, threatening to "annihilate" Iran if a deal is not reached, although, in his usual style, he also said that US negotiators had ”a very good meeting, a very productive meeting” with Iranian officials, and that there was “a lot of momentum” towards an agreement. 

ING strategist Frantisek Taborsky says the National Bank of Hungary (NBH) delivered an expected pause in rate cuts and lowered its inflation target to 2.5%, creating a supportive backdrop for the Hungarian Forint. He sees scope for further curve flattening and potential retest of 360 EUR/HUF, but stresses that global Dollar strength, energy prices and Fed hikes could easily dominate the FX outlook.

NBH stance supports but globals constrain

"The National Bank of Hungary meeting delivered exactly what the market expected – a pause in the rate-cutting cycle and a reduction of the inflation target from 3.0% to 2.5%. From the market's perspective, this was a case of ticking boxes that had been anticipated since the April general election."

"We believe the market would not hesitate to price in rate hikes at the front end of the curve if energy prices rise again and Hungarian inflation climbs in the coming months (NBH forecast of 3.1% average inflation for next year). Meanwhile, the long end still offers room for convergence trades, and long-term yields should grind lower."

"The combination of a lowered inflation target and a halt to rate cuts creates a very positive environment for the FX market. On the other hand, the global backdrop remains largely negative, despite the recent relief rally. The US dollar is at record strength, EUR/HUF remains highly sensitive to energy prices, and Fed rate hikes could trigger renewed pressure on emerging market currencies, which have shown remarkable resilience so far. "

"The overall picture is thus very mixed, and global factors could easily take the driver's seat. Although our bias remains bullish for the forint, and we could retest the 360 EUR/HUF level, further developments are heavily dependent on global factors at this moment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

German flash HCOB Manufacturing PMI has come in lower at 53.8 in September. The data was expected to arrive higher at 54.5 from 54.3 in August. However, the overall business activity remain stronger-than-expected due to robust Services PMI data. The Composite PMI jumps to 53.8 rom the previous reading of 51.8. The Services PMI returns to the positive territory, arriving at 52.9 from 49.7 in August. A figure above 50.0 is considered as expansion in the business activity.

"German businesses reported further signs of resilience in September, with output growth picking up speed, expectations towards the outlook holding steady and employment rising for a second month running, all despite renewed pressure on the inflation front," Phil Smith, Economics Associate Director at S&P Global Market Intelligence said.

Market reaction

The initial reaction by the Euro (EUR) remains muted despite strong German Composite PMI data. At press time, EUR/USD is down 0.22% to near 1.1424 due to US Dollar's (USD) outperformance.

Deutsche Bank strategists note that United States (US) equities finished virtually flat, as strength in technology and semiconductor stocks offset a sharp decline in financials. The NASDAQ reached a fresh all-time high, while concerns that AI could pressure margins and fees weighed on financial shares. European equities were mostly modestly higher, while Asian markets traded mixed and US equity futures remained near flat.

Tech strength and financials weakness

"Despite the volatile newsflow, equities ended the day little changed, with the S&P 500 down a mere -0.001%. Tech stocks saw a better performance, with the NASDAQ (+0.45%) moving up to a fresh all-time high."

"That included further strong gains for chip stocks, with the Philly semiconductor index (+2.06%) posting a 6th consecutive gain. Trump himself also commented on AI in his speech at the UN, terming it “super intelligence” and rejecting attempts to control it. By contrast, financials (-1.98%) led the declines within the S&P 500, which appeared to be driven by concerns that AI could erode margins and fees."

"In Europe, equities mostly saw modest gains, with the Stoxx 600 (+0.13%), CAC 40 (+0.20%), and DAX (+0.02%) rising. The exception was the UK’s FTSE 100, which fell -0.29%."

"Turning to Asia, markets are mixed this morning. As I check my screens, the KOSPI (+0.45%) is posting a moderate gain, with Japan’s markets still closed until tomorrow. Elsewhere, Chinese equities are under pressure, with the Hang Seng (-0.74%) underperforming both the CSI 300 (-0.50%) and the Shanghai Composite (-0.36%). Meanwhile, Australia’s S&P/ASX 200 (+0.08%) is little changed. US equity futures are also trading near flat, with those on the S&P 500 up +0.09%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)