Source: Adam Button, ForexLive via TradingView — “European markets wrap: PMI beats, dollar steady as risk remains cautious”
European Markets Wrap: PMI Strength Offers Some Optimism as Caution Prevails in Global Risk Sentiment
Original article by Adam Button, ForexLive via TradingView
The European markets today reflected a cautious optimism fueled by better-than-expected Purchasing Managers’ Index (PMI) data. While the numbers offered a glimmer of resilience in parts of the eurozone economy, risk sentiment globally remains restrained as investors continue to digest central bank moves, inflation trends, and slowing global growth.
Here’s a detailed breakdown of the day’s top developments in European trading, currency movements, PMI data, and key themes shaping trader sentiment.
Highlights From Today’s European Trading Session
– European equity markets hovered near the flatline for most of the session.
– Stronger-than-forecast PMI data across several eurozone countries bolstered hopes that economic activity may be stabilizing.
– The US dollar held firm but lacked strong directional momentum.
– Safe-haven assets like gold continued to see modest inflows, reflecting a generally cautious tone.
– Bond yields moved marginally higher, responding to stronger data and waning recession fears.
– Currency traders showed limited risk appetite, particularly as major central bank policies remain in focus.
Eurozone PMI Data Surprises on the Upside
The most significant data point during the session was the PMI data from the euro area. The report showed composite PMI readings that were stronger than expected, sparking limited optimism across equity markets and currency trading desks.
– In Germany, the manufacturing PMI rose to 43.5 from the previous reading of 42.5, reflecting a slight rebound in industrial activity, though it remains in contraction territory (below 50).
– German services PMI climbed to 54.0, moving further into expansionary territory.
– The eurozone’s composite PMI came in at 52.3, above the 52.0 forecast and previous month’s result, indicating modest growth.
– France showed similar trends, with both services and composite readings topping expectations.
These numbers hint at a stabilizing business environment in Europe, particularly in the services sector. However, the manufacturing side of the economy still faces sustained headwinds from global demand softness and elevated borrowing costs.
Market Reaction to PMI Releases
Initial reactions to the PMI data were subdued. The euro strengthened slightly against the US dollar, rising to an intraday high of 1.0860 before paring gains later in the session.
– EUR/USD saw a brief rally post-release, but failed to break significant resistance levels.
– European equities remained largely range-bound, with investors cautious about interpreting one data point as indicative of a broad economic uptick.
– German DAX and French CAC 40 finished flat, while the UK’s FTSE 100 edged slightly lower.
– Italian and Spanish indices responded more positively, owing to relatively stronger local PMI prints.
Despite beating expectations, PMIs remain well below robust growth levels. Investors still want to see multiple high-frequency indicators improving before repositioning risk substantially.
The Dollar Remains Firm Amid Cautious Risk Mood
Over in the FX space, the US dollar showed stability, with the DXY index holding near recent highs around 105.80. The greenback’s relative strength is tied to continued uncertainty around Federal Reserve policy moves and expectations for global economic divergence.
Key themes shaping dollar behavior:
– US economic resilience: Data from the US continues to outpace many of its developed market peers.
– Sticky inflation: Persistent inflation pressures have kept hopes for rate cuts in check, supporting yields and the dollar.
– Strong retail sales last week reaffirmed consumer vitality.
– Fed communication remains resolute about the need to maintain restrictive policy until inflation convincingly returns to target.
Major currency pairs showed muted reactions:
– EUR/USD: Hovered near 1.0850 after the PMI data, lacking the momentum to break resistance at 1.0900.
Explore this further here: USD/JPY trading.