Euro dips after mixed PMI figures

The euro has weakened against the US dollar after Brussels revealed mixed readings from today's PMI reports.

The eurozone services sector grew in September, with a reading of 52.1, up from 50.7 in August. Any figure above 50.0 indicates an expansion in the sector, and this latest report is the highest in 27 months. On the other hand, the manufacturing PMI slipped from 51.4 last month to 51.1 in September, which shows that the eurozone's recovery is not without hiccups.

Angel Merkel has won a third term as German chancellor. Ms Merkel’s Christian Democratic Union party took the lion’s share of the vote, but the new government has not yet been formed. A coalition with the Social Democrats seems likely. Traders are waiting to see what the new administration looks like before they take a position on the euro.

Erkki Liikanen said the European Central Bank is ready to increase liquidity in the eurozone financial system if necessary. The knowledge that Brussels will intervene in the credit market if the cashflow in the region starts to dry up could provide a boost to EUR/USD.

Spot FX EUR/USD chart

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