EURUSD, H1
Eurozone Composite PMI improved in February, with a stronger services reading counterbalancing disappointing manufacturing confidence. The services PMI came in much stronger than anticipated at 52.3, up from 51.2 in the previous month, while the manufacturing PMI fell back to just 49.2 from 50.2, and under the key 50.0 level that marks the difference between growth and contraction. This left the composite at 51.4, up from 51.0 in January. The manufacturing sector is now in contraction territory, also at the wider Eurozone level and there are still plenty of headwinds, including the lingering trade tensions with the U.S. and the threat of tariffs on car imports from the EU into the US. The manufacturing output index was at a 69 month low in February. The services sector meanwhile is bouncing back, despite ongoing disruptions by the yellow vest protests in France. Despite the weakness in manufacturing sentiment, employment growth in the sector held steady, while the pace of job creation in the services sector quickened. Still, Markit also reported that there were signs of “inflationary pressures waning”, which will add to the arguments of the doves at the ECB and those that are arguing for another round of TLTRO loans. The Eurozone economy appears to be at a crossroads and depending on how trade talks and Brexit go can either still bounce back, or suffer a much worse slowdown than currently expected.
Earlier, French PMI readings were better than anticipated, and effectively signalling stabilisation, with the composite reading coming in a 49.9. The manufacturing PMI rose to a 5 months high of 51.4 from 51.2 in the previous month, while the output index lifted to 50.1 from 49.8. The Services PMI rose to 49.8 in February, from a disappointing 47.8 in January, which also suggests that the sector is stabilising, despite ongoing disruptions by the “gilet jaunes” protests. German PMI readings were mixed, with the manufacturing number disappointing and dropping sharply to just 47.6, but the services reading jumping to 55.1 from 53.0.
EURUSD sank to the 200 EMA at 1.1330 zone following the mixed data releases. EURGBP down to S1 at 0.8870 and EURJPY down to 125.40.
Stuart Cowell
Head Market Analyst
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