Euro: Loses ground against US Dollar as risk concerns linger - Danske Bank

Sentiment towards the Euro has weakened as French CDS spreads rise, Danske Bank notes, with EUR/CHF moving lower and EUR/USD briefly slipping below 1.12. Alongside the currency declines, US and German bond yields fell across the curve, and October’s Eurozone consumer confidence reading disappointed expectations. Markets now await the flash PMIs: a projected decline in the composite index from 53.1 to 52.7 would still point to moderate economic growth.

What is weighing on the Euro and Treasury yields?

"EUR/CHF also dropped as the bearish EUR sentiment grew together with a new rise in the French CDS. EUR/USD also briefly fell below 1.12. Yields dropped across the curve both in US and Germany. Notably, the 10Y US Treasury yield fell below 5% for the first time in a month."

"In the euro area, consumer confidence fell more than expected in October to -17.9 (cons: -17.0, prior: -16.8), which is the lowest level since May."

"Weak confidence should weigh on consumption in the fourth quarter of the year. However, we saw decent consumption growth in Q2 despite plunging confidence, so the indicator is not the most reliable for spending at the moment. "

"In the euro area, the flash PMIs for October are released, which are set to be important for markets. Following a positive trend in the latest months, the PMIs are expected to show stabilisation with small declines. "

"The composite PMI is expected to fall to 52.7 from 53.1 which is still a strong level that indicates moderate growth in the economy, despite a small decline. We pay particular attention to the price components, which started to rise again last month due to higher energy prices."

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