Economists bracing for uptick in Eurozone PMI Composite Index
The euro was among the worst performing major currencies in the world on Tuesday.
The EUR/USD exchange rate had edged above the 1.05 threshold last week to its highest levels since late-January, although some of these gains have since evaporated amid jitters surrounding the Russia-Ukraine negotiations.
We think that the retracement is evidence of just how difficult it will be for the common currency to post any meaningful advances so long as the spectre of Trump’s protectionism looms in the background.
Frankly, we have little idea as to what form his tariffs towards the EU will take, whether it be blanket or sectoral.
What we do know, however, is that these trade restrictions are almost certainly on the way, and that may make it difficult for a sustained reversal in sentiment towards the euro. Without question, the most noteworthy macroeconomic release out of the Euro Area this week will be Friday’s preliminary PMI figures for February.
Given the growing risk of Trump’s tariffs, which will perhaps be implemented sooner than much of the market had anticipated, these timely data points take on added importance.
Economists are bracing for an uptick in the composite index - any downside surprise here would risk being greeted with a bout of euro weakness.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
