Markit's preliminary Purchasing Managers' Indexes for October are set to reflect businesses' reaction to Europe's second COVID-19 wave and raise fears of a downturn. The reaction in EUR/USD mostly depends on how much the eurozone compound PMI falls, Yohay Elam, an Analyst at FXStreet, reports.
Key quotes
“Economists expect services and manufacturing PMIs to drop across the continent. On the other hand, the industrial sector is doing better, expanding in France, Germany, and the whole eurozone. The sector has been keeping the currency bloc's composite index afloat above 50 in September. That is set to change now, with a flip from 50.4 to 49.5 points.”
“Growth extends: Investors may calculate that governments acting fast could stem the second wave quickly and reopen the economies swiftly. Such a ‘bump in the road’ optimism could keep the composite PMI above 50 and boost EUR/USD.”
“Dip into contraction: Economists may be hitting the nail on the head, projecting a minor slide under the 50-point mark. A minor decline that meets estimates may marginally weigh on the common currency, yet without leaving a long-term impact.”
“Double-dip recession: In case the composite eurozone PMI misses estimates and especially if it tumbles under 49 points, it would send shivers down investors' spines in the old continent, fearing a second downturn that could last for longer. In this scenario, euro/dollar could suffer.”
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