Eurozone PMIs Underperform
The latest economic data for the Eurozone has raised serious concerns over the health of the recovery in the single customs union. Both manufacturing and services PMIS in the Eurozone undershot expectations last month. The manufacturing reading fell back to 51.7 last month from the prior month’s 51.8 reading, undershooting expectations of a 52.7 reading. Similarly, the services PMI reading fell back to 50.1, sitting just above the neutral level. This marked a strong drop from the prior month’s 54.7 reading and a firm disappointment to the 54.6 reading forecast.
These latest data suggest that much of the knee jerk reaction to the ed of lockdown has now been seen and the economy is now struggling with the post lockdown environment. Despite all nationwide lockdowns easing in the Eurozone, many countries have been forced to reintroduce local lockdowns, which have created a drag on activity and demand.
The employment component of the PMI in both sectors was weak again last month, suggesting that businesses are still having to cut employment numbers. Furthermore, given the uncertainty around the near-term outlook for the pandemic, the employment landscape looks likely to remain muted. Despite the disappointing headline readings, there are some positive points to highlight; in the manufacturing data, the output index was seen rising from 55.3 to 55.7 while the new orders component was also seen higher over the month.
UK PMI’s Beat Expectations
In the UK, it was a different story with another set of bumper data releases today. Following on from a solid set of CPI releases on Tuesday, both the manufacturing and services PMI releases data were seen beating expectations. Manufacturing rose to 55.3 over the month, marking a firm improvement from the 53.3 seen over the prior month and also coming in well above the expected 54 reading.
The services PMI was also seen rising firmly over the quarter, moving up to 60.1 from the prior month’s 56.5 reading, firmly beating market estimates of a 57 print. The services PMI is now sitting at a six-year following this latest increase.
Following on from better than expected CPI data, today’s releases have further bolstered the view that the UK economy is recovering faster than expected. However, the key now will be how the economy performs once the various support operations in place this month come to an end, such as the government’s temporary VAT suspensions and the Eat Out To Help Out Scheme. Furthermore, with both sectors showing a further loss of jobs, there are fears how these readings will be impacted once the government furlough scheme comes to an end with many analysts fearing a jobs cliff-edge as companies struggle to keep staff on.
EURGBP (Bearish below .9097)
From a technical viewpoint. Following the failure to break above the .9097 level resistance, EURGBP has since reversed and broken below the rising trend line. While below here, the near term outlook remains bearish with the .8861 level the next key support to note. Below here, the path is open for a much deeper correction towards the .8544 region.
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