Title: Euro Rises as German and French PMIs Surpass Expectations
Source: XTB Market Analysis. Original article by XTB Research Team. Access the original article here.
Summary
The euro saw a notable boost on Friday, June 21, 2024, after the release of stronger-than-expected flash Purchasing Managers’ Index (PMI) data from Germany and France, two of the Eurozone’s largest economies. The surprising strength in both services and manufacturing sectors helped propel EUR/USD higher by 0.2%, further encouraging investor sentiment towards the single currency and European equities.
Market watchers interpreted the better-than-anticipated economic readings as an early sign of potential stabilization and growth in the Eurozone, amidst lingering macroeconomic challenges including high interest rates and a slowing global economy. The FX markets reflected this optimism with the euro trending upwards, while stocks across Europe also registered modest gains.
This report delves into the implications of the PMI releases, the market reaction, euro performance, and what the figures signal about the broader European economy moving forward.
PMI Results Overview
Germany’s and France’s flash PMIs released by S&P Global for June 2024 exceeded market expectations in both manufacturing and services sectors, an encouraging sign following months of sluggish growth and contraction in parts of the Eurozone.
Germany:
– Manufacturing PMI: Rose to 43.4, up from 45.4 in May
– Services PMI: Jumped to 53.5, exceeding expectations and up from 54.2 in May
– Composite PMI: Increased to 50.6; crucially, this pushed the figure above the expansion threshold of 50 for the first time in several months
France:
– Manufacturing PMI: Registered 45.3, down from 46.4 but above consensus estimates
– Services PMI: Increased significantly to 48.8 from 49.3, coming close to the neutral threshold
– Composite PMI: Climbed to 48.8, reflecting relative stabilization despite remaining in contraction territory
Eurozone Aggregate (Including Germany, France, and smaller member states):
– Manufacturing PMI: Clocked in at 45.6, following a consistent trend of steadying production levels
– Services PMI: Registered 52.6, up from 53.2 in May, remaining firmly in expansion
– Composite PMI: Rose to 50.8, marking the highest reading since July 2023
Key Takeaways from the PMIs
– Services activity continues to support growth in the Eurozone, helped by resilient consumer demand
– While manufacturing still struggles, the rate of contraction appears to be moderating
– Germany, often considered the industrial backbone of the Eurozone, showed clearer signs of broadening recovery
– France’s figures suggest more moderation, but the negative momentum in manufacturing is slowing
– Improvement in composite PMI above 50 is an essential milestone indicating expansion in overall business activity
Market Reaction
The FX and equity markets responded positively to the PMI data, with the EUR/USD jumping by approximately 0.2% from around 1.067 to 1.070. This move came on the back of a weakening dollar and the rising confidence in Eurozone’s short-term economic outlook.
EUR/USD Reaction:
– Pre-data release: Hovering around 1.067
– Post-data release: Ticked higher to 1.070, a swift intraday gain of 0.2%
– The move was fueled by:
– A stronger composite PMI reinforcing Eurozone resilience
– A dollar pullback amid stable US Treasury yields
– Market pricing in delayed or moderated European Central Bank (ECB) rate cuts due to stronger-than-expected economic data
Euro Crosses:
– EUR/GBP rose modestly on the session, reflecting France and Germany’s comparative improvement over UK economic indicators
– EUR/JPY also rallied as both the yen and US dollar underperformed
European Equity Markets:
– Euro Stoxx
Read more on EUR/USD trading.