Manufacturing & Services PMI’s: What Does It Mean For Euro & Equities?

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The first day of the week comes with few economic releases across the board, whether in Asia, Europe, and the US. However, volatility is still on the rise as Trump took office. Yet, the US equities seem to be unhappy with the new administration, while the US Dollar kept on declining but stabilized above 100.0 barrier, which should be watched carefully today. In today’s article, we will take a look at the upcoming economic releases ahead, which set to have a notable impact on the markets.

During the European session ahead we will be waiting for Manufacturing and Services PMI’s from some of the Euro area countries, including France, Germany, and the EU.

Traders will be watching these figures as they should either strengthen the case of tapering QE by the ECB in April or ease the possibility to do so.

Expectations

Indicator

Forecast

Prior

French Manuf. PMI

53.4

53.5

French Services PMI

53.2

52.9

German Manuf. PMI

55.5

55.6

German Services PMI

54.6

54.3

Euro Zone Manuf. PMI

54.8

54.9

Euro Zone Services PMI

53.9

53.7

What Does It Mean?

Manufacturing PMI index measures the level of a diffusion index based on surveyed purchasing managers in the manufacturing industry.

The Services PMI index measures the level of a diffusion index based on surveyed purchasing managers in the services industry.

Above 50.0 indicates industry expansion, below indicates contraction. There are 2 versions of this report released about a week apart – Flash and Final. The Flash release, which the source first reported in Mar 2008, is the earliest and thus tends to have the most impact

Why These Figures Matter?

These figures are considered as a leading indicator of economic health – businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy

Survey of more than 2000 purchasing managers in total, which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

Today’s Figures & The ECB

The ECB is monitoring the economic activities very carefully, especially after the recent rise in inflation. Today’s PMI’s expectations seem to be encouraging. Another positive outcome would mean that the ECB is on the right track to start tapering in April.

What Does It Mean For The Euro & Equities?

A positive outcome would keep the Euro supported well above 1.0650 for the time being, as traders will increase their bet over the ECB tapering in April. However, indices might not be happy with such outcomes, as liquidity and the ECB cheap money era is about to end, which would put some pressure on the EU indices today.

Another Risk

Traders should keep an eye on the bond market from now on, the global bond yields are rising since December, especially as the ECB is willing to taper the purchases as soon as April. The German 10 Year Yield is back above the zero barrier, and most of the European yields are on the rise. This should be watched carefully, as an excessive rise in yields, might cap the Euro gains if any.

Levels To Watch

Symbol

S3 S2 S1 Pivot R1 R2 R3
EURUSD 1.0616 1.0649 1.0707 1.0740 1.0798 1.0831 1.0889
EURJPY 119.27 120.17 120.75 121.65 122.23 123.13 123.71
EURGBP 0.8466 0.8523 0.8555 0.8612 0.8644 0.8701 0.8733
EURCHF 1.0660 1.0681 1.0704 1.0725 1.0748 1.0769 1.0792
EURCAD 1.4117 1.4169 1.4209 1.4261 1.4301 1.4353 1.4393
EURAUD 1.4017 1.4069 1.4132 1.4184 1.4247 1.4299

1.4362

 

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