EUR/USD has edged lower in the Friday session. Currently, the pair is trading at 1.1376, down 0.23% on the day. On the release front, German Final GDP contracted 0.2%, matching the estimate. German and eurozone manufacturing PMIs softened in October. Later in the day, the U.S. releases services and manufacturing PMI reports.
German GDP and PMI reports pointed downwards on Friday, putting pressure on the euro. Final GDP declined 0.2% in the third quarter, in line with expectations. This marked the first decline since 2014 and was identical to Preliminary GDP, which was released last week. Manufacturing PMI fell to 51.6, pointing to a stagnant manufacturing sector. This marked a fourth straight drop in manufacturing activity. Services PMI dropped lower, with a reading of 53.3 points. Both indicators missed their forecasts. The contraction in growth has weak PMIs is bound to raise concerns – is the long German expansion over? German officials attributed the weak GDP releases to new emission standards for German cars, but it’s likely that the drop can also be attributed to a weaker global economy due to the ongoing trade war between the U.S. and China. With no sign that the two super-economies will reach an agreement anytime soon, the eurozone economy could face more headwinds, which in turn could weigh on the euro.
With time running out to reach a Brexit deal, the EU and Britain are scrambling to reach a deal. The sides are scheduled to sign a withdrawal agreement in Brussels on Sunday, at a special Brexit summit. Still, uncertainty abounds, as the post-Brexit relationship between the parties remains unclear. Some EU members feel that Britain is getting too sweet a deal, and Spain has warned it could veto the deal unless it has more of a say over any agreement concerning Gibraltar. A solution to the Irish border issue has proved elusive, although everyone seems to agree that a hard border between Ireland and Northern Ireland is not an option. Back home, Prime Minister May will have an uphill battle pushing the deal through parliament, with the Labor party and a many Conservative MPs set to vote against the deal. May has argued that the withdrawal agreement is better than a no-deal scenario, but both sides remain ready for this worst-case possibility. On Friday, German finance minister Olaf Scholz warned that a no-deal Brexit would cause significant economic harm to both sides, adding that Germany was prepared for such an outcome.
