German/ Eurozone flash PMIs Overview
Amongst the Euro area economies, the German and the composite Eurozone PMI reports hold more relevance, in terms of its impact on the European currency and the related markets as well.
The flash manufacturing PMI for Germany is seen arriving at 45.2 in July, a shade higher from June’s 45.0 final print while the index for the services sector is expected to drop to 55.3 this month.
The forecast for the Eurozone flash manufacturing PMI shows 47.6 for July vs. 47.6 seen in the previous month. The Eurozone services sector PMI is seen lower at 53.3 in the reported month vs. 53.6 last.
How could they affect EUR/USD?
“Europe’s weak economic growth has been supported by the service sector this year. Manufacturing has been declining since February with the index reading below the 50 division between expansion and contraction. That tenuous situation will deepen when the purchasing managers’ indexes from London based Markit Economics show no improvement in sentiment in July for Europe’s factories and a drop-in in the wider service and composite measures,” FXStreet’s Senior Analyst Joseph Trevisani notes.
Therefore, the spot could extend the recent declines, opening floors for a test of 1.1125 (May 31 low). A beak above which the EUR/USD pair would target 1.1115/06 (May 30/ 23 lows).
Should the data surprise the markets to the upside, the rates could see a corrective bounce towards 1.1168 (daily pivot). Buyers will gain momentum above the last, paving the way for a test of the 5-DMA barrier at 1.1201.
However, the reaction to the data is likely to be limited, as markets stay focussed on the ECB monetary policy decision due on Thursday for the next direction. Its widely expected that the ECB would hint at policy easing to be acted upon at its September meeting.
At the time of writing, the EUR/USD pair meanders near two-month lows of 1.1141, modestly flat on the day.
Key Notes
Eurozone PMIs amongst market movers today – Danske Bank
EUR Futures: extra losses look likely
EUR/USD forecast: Vulnerable near multi-week lows, Euro-zone PMIs eyed ahead of ECB on Thursday
About German/ Eurozone flash PMIs
The Manufacturing Purchasing Managers Index (PMI) released by the Markit Economics captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the Euro Zone. Usually, a result above 50 signals is bullish for the EUR, whereas a result below 50 is seen as bearish.
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