The research team at Danske Bank explains that so far, we have yet to see the same signs of a peak in euro business cycle indicators that we are witnessing in the US and China which raises the question whether the euro area PMI can continue to decouple.
Key Quotes
“Euro PMI has continued to move higher and points to robust growth. The economic surprise index in the euro area is also still high. This stands in sharp contrast to the steep fall that has taken place in the US. This raises the question whether the euro area PMI can continue to decouple.”
“We doubt this is the case. Part of the impetus for euro area manufacturing is currently coming from the export sector. This factor is likely to fade, with China slowing down. Euro area private consumption has also faced headwinds from a decline in real wage growth moving into negative territory (due to the rise in inflation) after a period of a decent increases in purchasing power when inflation was 1.5 percentage points lower than wage growth.”
“Overall, we look for euro PMI to peak soon and follow the US and China lower. We do not expect a big setback or the recovery to derail but simply believe that the pace will slow a bit. However, in combination with a weaker global backdrop, this means the current very positive picture of the euro area will be less upbeat when we get to the end of the year. With inflation set to decline to around 1.0-1.5% in early 2018, we still believe the ECB will extend asset purchases into the new year but reduce our estimate of the pace to EUR40bn per month.”
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD fluctuates near 1.0700 after US data
EUR/USD stays in a consolidation phase at around 1.0700 in the American session on Wednesday. The data from the US showed a strong increase in Durable Goods Orders, supporting the USD and making it difficult for the pair to gain traction.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold stays in consolidation above $2,300
Gold finds it difficult to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to turn north.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.