Eurozone PMIs Preview: Three reasons why expectations are too low, EUR/USD may rise

  • Markit's preliminary November PMIs are set to show declines on all parameters.
  • Previous beats, vaccine prospects, and light lockdowns make room for an upside surprise.
  • EUR/USD has room to rise in response to the data. 

Winter has arrived and with it, a surge in virus cases and an economic downturn – that is the main reason to expect a drop in business sentiment. However, the downbeat mood may have gone too far.

The economic calendar is pointing to significant declines in all of Markit's preliminary Purchasing Managers' Indexes in November, based on lockdowns in Germany, France, and most of the currency bloc's countries.

Source: FXStreet

The all-encompassing eurozone composite PMI is set to fall from 50 – the level separating expansion and contraction – to 46.1 points. Is this indeed the case? 

Three reasons to expect upside surprises

1) The cavalry is coming

Pfizer and BioNTech announced their COVID-19 candidate is 90% efficient on November 9, on time to be factored in by Markit's surveyors. The initial success had the most significant impact on financial markets and also opened the door to others using the mRNA technology. Moderna came a week later with its encouraging results. 

While any immunization scheme has production, storage, and distribution hurdles, having this "light at the end of the tunnel" is a considerable boost to morale that could lead to a better PMI.

2) Lockdowns are somewhat lighter

Contrary to the panic shuttering of the economies in the spring, the public, medical staff, and governments are far more prepared for the winter wave. Schools remain open almost everywhere and office workers carry their duties from home. 

Moreover, Germany's lockdown was described by officials as "light." France has been under stricter measures, yet these have been bearing fruit, potentially also feeding into business confidence. 

3) Economists were too pessimistic

Examining the eurozone composite PMI, the consensus of economists' estimates was too pessimistic in the past seven releases. While they forecast the general direction of travel in the past three months – to the downside – the outcome beat estimates. 

Source: FXStreet

Will recent history repeat itself for the eighth time in a row? A sharp plunge of nearly four points seems inconsistent with recent declines, leaving room for an upside surprise.

EUR/USD reaction

The tug of war between vaccines and the development of the virus remains left, right, and center for markets. Nevertheless, as the dust settles from the vaccine news and previously from the US elections, economic data may come to the fore. EUR/USD has been hesitating after an upside swing in response to immunization news. 

EUR/USD has dropped out of the uptrend channel, but still benefits from upside momentum on the four-hour chart:


Upbeat PMIs, especially the one from Germany's manufacturing sector and the composite read, could lift the common currency. 


Markit's preliminary eurozone PMIs provide a snapshot of how the old continent is coping with the second wave of lockdowns. Expectations may be too low. 

More EUR/USD Weekly Forecast: Bulls remain in control after virus-vaccine struggle



Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

AUD/USD: Upbeat China PMIs favor bulls near fresh three month high around 0.7400

AUD/USD remains positive after China’s activity data for November flashed welcome signs. November’s China NBS Manufacturing PMI, Aussie TD Securities Inflation flashed more than expected results. Market mood stays cautious optimistic amid vaccine hopes, Brexit jitters and Aussie-China tussle.


EUR/USD: Refreshes three-month high towards 1.2000, battles triangle resistance

EUR/USD eases from fresh high since September 01. The pair rose to the highest in three months before a few hours but couldn’t cross the upper line of a five-week-old ascending triangle formation. RSI conditions warrant caution, bears are less likely to take entries above 1.1870.


NZD/USD refreshes 2.5-year high on strong China PMI above 0.7400

NZD/USD rises to the fresh high since June 2018 after China data. China’s NBS Manufacturing PMI, Non-Manufacturing PMI beat market forecasts in November. ANZ Business Confidence, Activity Outlook also came in positive for November.


Gold: Trades below 200-day MA for first since March

Gold is trading below the widely-followed 200-day Simple Moving Average (SMA) for the first time since March. The metal is changing hands near $1,783 per ounce, representing a 0.25% loss on the day. 

Gold news

Black Friday 2020 Discounts!

Learn to trade with the best! Don't miss the most experienced traders and speakers in FXStreet Premium webinars. Also if you are a Premium member you can get real-time FXS Signals and receive daily market analysis with the best forex insights!

More info

Forex Majors