1. Why these PMIs are important
I'm sure you're all fully aware that the euro zone just emerged out of its longest recession in 40 years.Though it's definitely relieving to see the euro zone finally post positive growth, many are still unconvinced about its recovery. After all, growth remains uneven across the region and the economy still faces many headwinds. This partially explains why the markets hardly reacted to news that the economy had grown 0.3% in Q2 2013, exceeding forecasts for a 0.2% expansion.
Now more than ever, markets are interested in seeing how the economy will fair in the coming months. They want confirmation that the rebound we saw last quarter wasn't just a fluke, and the PMIs may just serve that purpose.
Unlike the GDP report, which is a lagging indicator, the PMIs are leading indicators of economic health. What this means is they have stronger implications on future growth and can provide more insight as to whether the recovery is gaining steam in Q3 or if what we saw in Q2 was nothing but a dead cat bounce.
2. How the markets may react
Obviously, if the PMIs out-perform forecasts across the board, it would paint a rosy outlook for the region and would suggest that the recovery has picked up its pace in Q3. That being the case, such results will likely be euro bullish.On the other hand, if all releases show disappointing results, we can reasonably expect the euro to weaken, as it would provide confirmation that the euro zone hasn't exactly gotten out of its rut.
There's also a chance that mixed results could also work against the shared currency if they show uneven growth across the region. For instance, if French and German PMIs show strong results but the euro zone-wide PMIs fail to impress the markets, it would imply highly uneven growth in the region, with weakness in the peripheral countries.
Editors’ Picks
EUR/USD loses traction, breaks below 1.1900
EUR/USD comes under extra downside pressure, breaching below the 1.1900 support once again on Tuesday. The improved tone in the US Dollar keeps the pair on the back foot after two consecutive daily advances. In the meantime, prudence is expected to kick in ahead of the release of the key US Nonfarm Payrolls on Wednesday.
GBP/USD slips back to daily lows near 1.3640
GBP/USD drops to daily lows near 1.3640 as sellers push harder and the Greenback extends its rebound in the latter part of Tuesday’s session. Looking ahead, the combination of key US releases, including NFP and CPI, alongside important UK data, should keep the pound firmly in focus over the coming days.
USD/JPY drops toward 155.00 as focus shifts to US data
USD/JPY meets fresh supply and inches closer toward 155.00 in the Asian session on Tuesday. The Japanese Yen holds the upper hand over the US Dollar after Japanese Prime Minister Sanae Takaichi led the ruling Liberal Democratic Party to a historic landslide win and on intervention talks. Traders brace for key US economic data that could offer more clues on the Federal Reserve's monetary policy.
Editors’ Picks
EUR/USD loses traction, breaks below 1.1900
EUR/USD comes under extra downside pressure, breaching below the 1.1900 support once again on Tuesday. The improved tone in the US Dollar keeps the pair on the back foot after two consecutive daily advances. In the meantime, prudence is expected to kick in ahead of the release of the key US Nonfarm Payrolls on Wednesday.
GBP/USD slips back to daily lows near 1.3640
GBP/USD drops to daily lows near 1.3640 as sellers push harder and the Greenback extends its rebound in the latter part of Tuesday’s session. Looking ahead, the combination of key US releases, including NFP and CPI, alongside important UK data, should keep the pound firmly in focus over the coming days.
Gold the battle of wills continues with bulls not ready to give up
Gold remains on the defensive and approaches the key $5,000 region per troy ounce on Tuesday, giving back part of its recent two day. The precious metal’s pullback unfolds against a firmer tone in the US Dollar, declining US Treasury yields and steady caution ahead of upcoming key US data releases.
Bitcoin's downtrend caused by ETF redemptions and AI rotation: Wintermute
Bitcoin's (BTC) fall from grace since the October 10 leverage flush has been spearheaded by sustained ETF outflows and a rotation into the AI narrative, according to Wintermute.
Dollar drops and stocks rally: The week of reckoning for US economic data
Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.
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