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Will Eurozone's PMI data be good news for the euro? – Preview

  • Eurozone flash business PMI data due on Thursday 09:00 GMT

  • The data might provide some relief, calm recession worries


EZ flash business PMIs to tick higher

A couple of dim US data was the key catalyst behind the euro’s 2.0% rally against the greenback last week. The common currency experienced one of its most constructive sessions so far this year, drifting as high as $1.0939, but domestic tailwinds remain absent in the euro area, making investors wonder whether the bullish trend reversal in the pair is underpinned by transitory factors.

Eurozone’s flash business PMI figures could provide fresh insight on the state of the economy on Thursday. According to the survey, business sentiment both in the manufacturing and services sectors has been in a gloom-mode since May, with the composite PMI index further easing in the contraction area to 46.5 in October.

While the previous release painted a blurry picture for Q4 after a marginal GDP contraction in Q3, analysts are now projecting that November’s readings could show some recovery. Specifically, expectations are for the manufacturing PMI index to climb moderately to 43.4 from 43.1 previously, and the services PMI index to tick up to 48.1 from 47.8 last month. Regional PMI data from Germany and France, which are the worst performing economies in the bloc, might also reveal a slight rebound when they are released ahead of the Eurozone-wide numbers.

There are some signs of business stability

Such a negligible increase would not be a game changer for the euro, but something is better than nothing. Besides, there is some evidence of economic optimism that could lead to a positive data surprise. The ZEW economic sentiment index, which tracks experts’ Eurozone outlook over the next six months, surged exponentially from 2.3 to 13.8 in November. The German index experienced a similar acceleration, turning positive for the first time since April. Although the current conditions index remained well dipped in the negative region, and a dynamic GDP growth rebound is definitely not in sight, the improvement in expectations indicates that investors are hopeful that conditions may not deteriorate further.

With inflation moving in the right direction in major economies, and therefore pushing additional rate increases out of the conversation, investors' morale might brighten. This is also reflected in the rocket rally the German DAX 30 index, as well as other global stock indices, staged last week.

Rate cut projections

As regards the persisting rate cut projections for 2024, futures markets are pricing in 95bps of policy easing by the end of 2024 for the ECB, but a stronger-than-expected rebound in business PMI figures could create some doubts about whether such a heavy rate reduction is necessary. If that turns out to be the case, EURUSD could attract fresh buying interest. Technically, the pair needs to overcome the 1.0940 resistance to access the 1.1000-1.1040 caution zone.

If the PMI data miss expectations and the details present a continuous decline in employment demand and new orders, EURUSD could drift lower in fears the recession risks could prompt rate cuts in 2024. Sellers might wait for a close below the 1.0820 floor before pressing the price towards the 200-day exponential moving average (SMA) at 1.0740.


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