EUR/USD could fall to 1.10 in coming weeks – Rabobank

Weaker German data series could further undermine the outlook for the euro. EUR/USD could suffer dips to 1.10 in the coming weeks, notes Jane Foley, currency strategist at Rabobank.

Other soft data may undermine the outlook for the EUR

“This morning’s flash estimate of Germany’s September PMI showed economic activity contracting at the fastest pace in seven months. According to the survey provider, there was “a sharp, accelerating contraction in manufacturing output, compounded by a near-stagnation of growth in the services sector.”

“It was also reported that ‘the decline in employment picked up pace as business expectations turned pessimistic for the first time in a year.’ The latest warning may suggest that wage inflation will moderate. This may suggest an easing of sticky inflation in the services sector. Further evidence of cooling services sector inflation is generally seen as needed to trigger further ECB rate cuts.”

“This morning’s data supports the importance of Germany’s September IFO release. More softness in this series could further undermine the outlook for the euro. We continue to see downside possibilities to EUR/USD 1.10 in the coming weeks.”