The European session was a risk-on session, with European stock markets remaining bullish and bond rates retreating, following a shaky start to the new week yesterday. Nonetheless, EUR/USD continues to remain bearish after some dovish comments from ECB members earlier.

Bond rates which have been falling may have been impacted after ECB hawk Isabel Schnabel effectively announced a halt to rate hikes. However, if you look at the ECB’s pricing for next year, markets are already aware of it. Instead, traders doubled down on her statements, given the first ECB rate decrease for next year has been pushed back to March from April just last week. The Euro has been depressed due to this, despite the improving services activity in Europe, as shown below. EUR/USD is down 0.3% to 1.0817, with the session low earlier reaching 1.0805.

Eurozone November final services PMI by HCOB – 5 December 2023

• November final services PMI 48.7 points vs 48.2 points prelim
• November initial reading for services PMI was 47.8 points
• Composite PMI 47.6 points vs 47.1 points prelim
• Prior Composite was 46.5 points

• Germany November final services PMI 49.6 points vs 48.7 points prelim
• prior reading for services PMI was 48.2 points
• Composite PMI 47.8 points vs 47.1 points prelim
• Prior composite PMI was 45.9 points

• France November final services PMI 45.4 points vs 45.3 points prelim
• Prior services PMI  was 45.2 points
• Composite PMI 44.6 points vs 44.5 points prelim
• Prior composite PMIO was 44.6 points

The jobs market is starting to show some dents. The Eurozone’s economic slowdown may not be deepening, but the employment market is starting to suffer, with employment conditions worsening for the first time in two year. Besides that, inflationary pressures are still there and are not lessening sufficiently to warrant a change in the ECB’s policy stance in the near future. Businesses in this industry face a true quandary, as low demand necessitates price reduction, yet rising input price inflation and increased wage demands force them to pass on higher prices to customers.

EUR/USD Live Chart