Euro PMIs expected to lose more steam

22 June, 2018

The Eurozone will see the release of its preliminary PMI figures for June on Friday, at 0800 GMT. Forecasts suggest the surveys may signal a further slowdown in the Eurozone’s growth momentum, and although that may not be much of a surprise for ECB policymakers, it may be another factor weighing on the already-battered euro.

It’s no secret the Eurozone’s economy has lost momentum since the beginning of the year. While growth rates are still decent, the currency bloc has clearly shifted down gears, a development the European Central Bank (ECB) has dubbed as a “soft patch” that it expects will fade soon. As such, investors will keep a close eye on the bloc’s Purchasing Managers Indices (PMIs) by HIS Markit for June, to determine whether the slowdown subsided, or intensified further at the end of Q2.

In June, the Eurozone’s preliminary manufacturing PMI is forecast to edge lower to 55.0 – from 55.5 in May, touching an 18-month low. Meanwhile, the services print is expected to tick lower to 53.7 from 53.8 previously, dragging the Composite index – that blends the two measures – down to 53.9, from 54.1 in May.

Besides a moderating economic outlook, business sentiment is likely to have been hit by a combination of trade and political risks. As Germany’s ZEW survey for June pointed out, financial experts are spooked by a potential trade dispute with the US, and the new Italian government pursuing destabilizing policies; concerns likely to be echoed in the PMIs too.

While a further decline in the PMIs may not come as a shock to ECB officials, given that President Draghi recently noted the soft patch may last longer than expected, it would still be a factor arguing for the first ECB rate increase to come later rather than sooner. Market pricing currently suggests the Bank will touch the rate-hike button only in Q4 2019, when it is anticipated to hike rates by a modest 10bps. Anything that pushes that timing back – for instance another set of soft PMIs – could work to the detriment of the common currency.

Technically, looking at euro/dollar, declines in the pair could encounter immediate support near the 11-month low of 1.1505, reached on May 29. A downside break would mark a lower low on the daily chart –and could open the way for the 1.1450 zone, defined by the peaks of 29 June, 2017. Even lower, attention would increasingly shift to the 1.1370 territory, the low of 13 July, 2017.

On the upside, immediate resistance to advances may come at 1.1645, the peak from June 19. If the bulls manage to power through it, then sell orders may be found near 1.1725 initially and at 1.1850 thereafter, these being the inside swing low on June 8 and the top of June 14 respectively.

Finally, note that the French and German PMIs will be released a few minutes earlier, at 0700 and 0730 GMT respectively, and have the capacity to impact price action ahead of the bloc’s prints.


Source  
Juiced up markets wrestle with the virus blues22 Jun, 2020  

Markets will remain tuned to virus news in the coming week, as the battle between stimulus-fueled optimism and second wave fears rages on...

Could euro bulls get the green light?18 Jun, 2020  

The euro was in the doldrums during the lockdown period until the two largest EU economies came together in support of a new recovery fund which...

Could Nonfarm payrolls be a wake-up call for dollar bulls?5 Jun, 2020  

The cocktail of violent protests across US major cities and a rising risk appetite upset the dollar and let other major currencies collect sizeable gains...


Euro could get positive boost from flash PMI figures21 May, 2020  

The Eurozone's flash PMI readings for the month of May will hit the markets on Thursday at 08:00 GMT, likely showing a reviving business sector as most...

Virus risks to set market tone25 Feb, 2020  

With not much on the economic calendar to enthuse markets next week, the virus and its impact on economies globally is likely to remain the primary driver...

Fed to stand pat but BoE could cut27 Jan, 2020  

There will be no shortfall of market-moving events in the coming week, with plenty of top-tier data and crucial central bank meetings shaping the agenda...


Inflation and retail sales to drive CAD18 Dec, 2019  

It's a busy week in Canada, where CPI inflation data will hit the markets on Wednesday, ahead of retail sales on Friday. The loonie soared lately...

BoE and BoJ to stand pat, Riksbank may hike16 Dec, 2019  

The last of the major central bank meetings of 2019 will be the main highlights next week as the Bank of England and Bank of Japan get their chance...

Retail sales next to move the dollar14 Nov, 2018  

As the Fed prepares to deliver its fourth rate hike of the year in December, key data on consumer prices and retail sales coming up might offer some clues...