Euro Support is Fleeting as PMIs Mixed

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Market Drivers July 24, 2018
EZ Flash PMI beat helping euro recover
USDCNY ends at yearly lows against a basket
Nikkei 0.51% Dax 0.44%
Oil $68/bbl
Gold $1222/oz.
Bitcoin $8000

Europe and Asia:
EUR Composite PMI 54.3 vs. 54.8

North America:
No Data

Flash PMI data from Eurozone delivered mixed results creating choppy price action in early European dealing as the single currency struggled to retake the 1.1700 figure.

Eurozone flash PMI data – the latest reading of economic conditions in Europe – offered an unclear picture of demand on the ground with French data missing its mark, German data showing strength in manufacturing while the composite reading came in at 54.3 versus 54.8.

While the overall PMI reading shows that economic activity remains well above the 50 boom/bust level this was the second month in a row of lower readings and suggests that simmering trade tensions with the US along with internecine issues with UK’s Brexit and Italy’s populist government are taking their toll on economic activity.

According to Markit, “ In a further sign that growth of output and hiring may continue to slow, future expectations of business activity slipped to a 20-month low. Optimism regained some poise in manufacturing, having slumped to a 31-month low in June, but slid to the lowest since November 2016 in the service sector. Growth of input buying in manufacturing also slowed to a 22-month low as firms scaled back production plans.”

The euro dipped to a low of 1.1655 ahead of the release, popped back above 1.1700 on a relief rally after German data proved better than expected and then slumped again to settle at 1.1680 by mid-morning dealing. With no data on the US calendar trading is likely to remain in subdued ranges for the rest of the day although if US yields which have strengthened markedly over the past 24 hours could push through the key 3.00% barrier on the 10 year, the dollar bid could resume and EURUSD shorts could press the pair towards the 1.1600 barrier as the day proceeds.

Boris Schlossberg
Managing Director

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