{"id":149990,"date":"2019-06-20T14:30:29","date_gmt":"2019-06-20T18:30:29","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=149990"},"modified":"2019-06-20T09:02:10","modified_gmt":"2019-06-20T13:02:10","slug":"getting-ready-for-flash-pmis-from-europe","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/06\/getting-ready-for-flash-pmis-from-europe\/","title":{"rendered":"Getting Ready For Flash PMIs From Europe"},"content":{"rendered":"
June 20, 2019<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

It\u2019s PMI day! Well, not quite.<\/p>\n

Tomorrow we get preliminary PMIs from the big players in Europe. This data does tend to move the markets quite a bit. With the Fed behind us, it\u2019s actually the last major data release that could inject volatility ahead of the weekend.<\/p>\n

We only have three of the major economies reporting, since the flash reading only includes the first half of the month. And it\u2019s some of the freshest data we\u2019ll get as we close out the second quarter. So it will be especially relevant to the markets this time around!<\/p>\n

Given the trends in manufacturing over the last month, and depending on what we get tomorrow, we could see Europe continue its lackluster performance from the first three months of the year.<\/p>\n

What We Are Looking For<\/strong><\/h2>\n

We kick off the day at 09:15 CET (03:15 EST) with French PMIs. Usually, this gets the most reaction in euro pairs, since it often sets the tone for the later data events.<\/p>

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15 minutes later,\u00a0it\u2019s Germany\u2019s turn<\/a>. Here, we can get some volatility if it goes against expectations left by prior data.<\/p>\n

Then we have to wait another half hour for the PMIs of the entire euro area. Ironically, this is the one less likely to move the markets despite being the more important of the data. It\u2019s usually because the result is calculated and expected after the two largest economies report.<\/p>\n

The Expectations<\/strong><\/h2>\n

Expectations are for France\u2019s manufacturing PMI<\/strong>\u00a0(the one that usually moves the market) to stay in growth territory.\u00a0The consensus is for a repeat of last month\u2019s 50.6.\u00a0<\/strong>This is pretty much just technically in growth territory. And, if it were to slip below 50, it would be somewhat disappointing for the markets. A result above 51.0 would break the trend, and we could see some relief come in to support the euro.<\/p>\n

We can expect Germany\u2019s manufacturing PMI to not only stay in contraction territory but also move deeper to 44.1<\/strong>\u00a0compared to 44.3. German manufacturing has been in contraction all year. This is largely attributed to problems related to the\u00a0auto manufacturing industry.<\/a>\u00a0While the figure seems to have hit a bottom at 44.1 (April), there haven\u2019t been many encouraging signs lately.<\/p>\n

A result below 44.0 would likely have a pretty strong negative impact on the euro. It\u2019s hard to pick a dividing line on the upside, where we could see a result that is clearly positive. Euro bulls will be looking for something that shows a reversal of the manufacturing trend.<\/p>\n

Projections indicate that the euro area\u2019s manufacturing PMI is will stay in contraction but improve just slightly to 47.9<\/strong>\u00a0from 47.7 (some are rounding the expectations up to 48.0). While not as negative as Germany, the euro area\u2019s PMI has mostly been dragged down by its largest constituent country.<\/p>\n

It also bottomed out in April, but at 47.5. This would be our floor to expect a strong negative reaction if the result were to come in below that. To the upside, a retracement to 49.0 or above likely would be seen as quite positive.<\/p>\n

Divergences Are the Order of the Day<\/strong><\/h2>\n

If expectations are met, we\u2019d see a widening in the gap between the euro area\u2019s economic situation and that of Germany. This would deepen the already unusual situation where the largest economy is not driving growth.<\/p>\n

While we could say this might increase pressure on Germany to succumb to more government spending, the Germans tend to be quite stubborn in that regard. The issue is likely more political, with the potential of a fracturing of the governing coalition as the economic prospects of the country diverge from the rest of Europe.<\/p>\n

The other divergence to keep an eye on is between manufacturing which is significantly underperforming, and in many cases is negative, compared to relatively solid performance in services. Since a lot of European manufacturing is for export, especially in Germany\u2019s case, it\u2019s an indication that the EU\u2019s domestic economy is functioning relatively well, but they are having trouble on the trade front.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex It\u2019s PMI day! Well, not quite. Tomorrow we get preliminary PMIs from the big players in Europe. This data does tend to move the markets quite a bit. With the Fed behind us, it\u2019s actually the last major data release that could inject volatility ahead of the weekend. We only have three of […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-149990","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/149990","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=149990"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/149990\/revisions"}],"predecessor-version":[{"id":149992,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/149990\/revisions\/149992"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=149990"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=149990"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=149990"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}