Euro extends rally, German and Eurozone PMIs next

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<li>Euro rally continues</li>
<li>Germany, eurozone PMIs to be released on Tuesday</li>
</ul>
<p>The euro has started the week with strong gains and has pushed above the 1.06 line. In the North American session, EUR/USD is trading at 1.0624, up 0.45%. The euro has been rallying since Thursday, climbing over 1% during that time.</p>
<p>The eurozone economy has been grappling with weak growth and high inflation. Germany, the traditional powerhouse of the bloc, finds itself lagging behind other members and may post negative growth in 2023. Given this weak economic backdrop, it’s not a surprise that consumer confidence is deeply pessimistic. GfK German Consumer Climate is expected to come in at -26.6 heading into November, little changed from the October print of -26.5.</p>
<p><strong>Eurozone, German PMIs eyed</strong></p>
<p>Germany’s manufacturing sector is sputtering, with fifteen straight months of contraction. The market consensus for Manufacturing PMI for October stands at 40.0, compared to 39.6 in October. The services sector is in much better shape and has shown growth every month in 2023 with only one exception. Still, the September reading of a revised 50.3 pointed to marginal growth and the market consensus for October stands at 50.0, which separates contraction from expansion. The services sector has been carrying the German economy and if it falls into contraction, Germany will be in serious trouble.</p>
<p>It is a similar story in the eurozone. Manufacturing PMI is projected to improve to 43.7, up from 43.4. As with Germany, manufacturing has contracted for 15 straight months. The Services PMI is forecast to remain steady at 48.7.</p>
<p>The ECB meets on Thursday and the markets are expecting the central bank to pause for the first time since the tightening cycle started over a year ago. Inflation remains above the 2% target, but as is the case in the US, bond yields have been rising and that could dampen inflation without the ECB having to tighten rates. The ECB could deliver a ‘hawkish pause’, with a reminder to the markets that the battle against inflation is not over.</p>
<p>.</p>
<p><strong>EUR/USD Technical</strong></p>
<ul>
<li>EUR/USD tested resistance at 1.0648 earlier and is putting pressure on 1.0679</li>
<li>1.0574 and 1.0531 are providing support</li>
</ul>
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