The euro has taken a major knock this morning, after the release of utterly dismal Flash Purchasing Managers Index data for Germany in September. The flash reading of the survey, based on the earliest responses, saw the Manufacturing Index fall to 41.4, while Services was 52.5. Together the readings heavily imply the German economy is in outright recession. The details of the report were even worse than the headline: new business flows fell at the quickest rate in seven years, including in the services sector, which has until now been relatively robust. The extent of the decline is significantly worse than expected – the median forecast submitted to Bloomberg was for the Composite PMI to remain in positive territory at 51.5. The index printed at 49.1. The eurozone wide Composite PMI now stands at 50.4, also worse than expected. This morning’s euro weakness has taken the EURUSD exchange rate to within half a percentage point of the two year lows seen earlier this month.


Sterling is trading lower this morning amid broad US dollar strength and a sharp selloff in the euro. News flow in the UK is mercifully irrelevant for sterling for now, while Boris Johnson visits New York and the Labour Party remains mired in internal politics. The week is light on data, although the SUpreme Court’s ruling on Boris Johnson’s proroguing of Parliament is expected early this week and may cause some sterling volatility depending on its implications. The Confederation of British Industry will release its Realised Sales Index on Wednesday.


With the eurozone economy falling apart, the greenback is up this morning against all G10 currencies even peripherally related to the euro, including NOK, SEK, GBP, PLN and others. Last week’s developments in markets and politics did little to suggest that any end to the dollar’s dominance is in sight, with the Fed’s 25 basis point cut doing nothing to dent the greenback. Trade headlines remain vague but positive, with Chinese state media reporting this morning that the cancellation of a visit to US farms by Chinese trade negotiators had nothing to do with lack of progress in talks. This week’s data calendar features a number of top tier data, and an array of Fed speakers. Today at 14:45 BST Markit Flash Purchasing Managers’ Indices will be released, followed at 14:50 and 18:00 respectively by speeches from the Fed’s Williams and Bullard.


The loonie was also hit by this morning’s dollar strength, and sold off with the euro and other currencies. Friday’s data was mixed, with Core Retail Sales falling 0.1% in July, although the broader main Retail Sales index rose 0.4% as expected. This week will see a paucity of Canadian data, with today’s Wholesale Sales data at 13:30 BST the only release of note.



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