Euro Declines Amidst German Weak Economic Data
The euro weakened toward $1.178, retreating from a four-year high of $1.192 touched on September 17, after weaker-than-expected German sentiment weighed on the currency.
Germany’s Ifo Business Climate Index fell to 87.8 in September from 88.9, with Current Situation Index slipping from 86.4 to 85.7 and Expectations falling from 91.4 to 89.7. The institute said prospects for recovery have “suffered a setback”.
By sector, weakness was broad-based. Manufacturing sentiment dropped further, with companies reporting weaker orders and fading optimism among capital goods producers.
Services took the hardest hit, plunging to -3.0, the lowest since February, as expectations grew more pessimistic. Trade sentiment also deteriorated, while construction offered a rare bright spot with modest improvement.
This followed a mixed HCOB PMI survey showing the Eurozone private sector expanding in September, led by stronger-than-expected services while manufacturing slipped back into contraction.
Meanwhile, investors digested remarks from Fed Chair Jerome Powell, who reiterated a cautious stance on future rate decisions amid persistent inflation pressures from tariffs and a softening labor market.
Powell described the move as a “risk management” adjustment rather than the start of a full easing cycle. Money markets now price in over a 90% chance of a Fed rate cut in October, with attention turning to Friday’s US PCE price index for guidance.
The euro had hovered near last week’s four-year high of $1.192 ahead of monetary indicators, and a series of speeches from European Central Bank and Federal Reserve officials that could shape the policy outlook.
The ECB signalled its rate-cutting cycle may be over, with policymakers warning of persistent inflation risks linked to tariffs, services, food prices, and fiscal policy.
The offshore yuan rose to around 7.13 per dollar on Thursday, paring back significant losses from the previous session, after the People’s Bank of China set a stronger-than-expected daily reference rate.
Prior to the market opening, the central bank set the reference rate at 7.1118 per dollar, firmer than Reuters’ estimate of 7.1293.
Market sentiment was further supported by signs of easing US-China trade tensions, despite US Ambassador to China David Perdue suggesting that a highly anticipated meeting between President Donald Trump and President Xi Jinping is more likely to occur next year rather than this fall.
