June Activity Jumps
The eurozone economic data released this week reflected a further pickup in activity over the last month. This came in line with the easing of lockdown measures.
The eurozone manufacturing PMI for June rose to a four-month high of 46.9. This reading marked a significant increase from the prior month’s 39.4 reading. It was also well above the expected 43.8 level.
Despite still being in contractionary territory, this latest reading marks a continued recovery in the factory sector. The data has boosted expectations that manufacturing could move back into expansionary territory as of the next reading, provided the current trend continues.
Services PMI was equally buoyant last month. The sector improved to 47.3 from the previous month’s 30.5, marking an almost 20-point recovery.
The reading was well above the 40.5 expectation and brings the sector almost back into expansionary territory.
French Data Soaring
In terms of member data, the French manufacturing reading was the most promising.
The index there rose to 52.1. well above the 46.1 level forecast. This increase from the prior month’s 40.6 level brings the factory sector back into expansionary territory.
The French services sector also saw a firm rebound over the month, rising to 50.3. This marks a nearly 20-point increase from the prior month’s 31.1 reading. It was also well above the 44.9 reading forecast.
German Data Not as Strong
In Germany, the increase wasn’t as high. However, there was still some progress, and the recovery continued over the month.
The German manufacturing PMI rose to 44.6 from the prior month’s 36.6 reading. This was was well above the 41.5 reading forecast.
The services sector recovered to 45.8 from the prior month’s 32.6 level and was well above the 41.7 level forecast.
Tentative Hopes Emerging but Risks Remain
With lockdown measures easing further across the eurozone, the expectations are for these PMI sets to rebound into expansionary territory over this month.
This should help alleviate some of the pressure on the ECB. At its last meeting, the central bank almost doubled its QE program, adding a further 600 billion EUR of purchases while signaling its willingness to act further if necessary.
The main risks now stem from a potential second wave of the virus as lockdown easing continues. In such circumstances, lockdowns might need to be reintroduced which would be devastating for the eurozone economy.
It would also surely be the point at which the ECB would need to act further.
EURJPY Finds Support, Bulls Testing Trend Line Once Again
The rebound in EURJPY off the 115 lows made it as high as 12 before reversing sharply. The correction lower found support at the 119 level and price is now challenging the bearish trend line once again, with the 121.50 level adding further resistance.
If price can break back above here, focus will be on further upside once again with the 122.61 level the next upside region to watch.