Date: 31 Jan 2018

When the January flash manufacturing PMI for the euro zone was released late last month, the consensus of the 42 forecasters polled by Reuters was for a 60.3 print after December’s final reading of 60.6. In reality the figure came in at 59.6 which, although it remained well above the 50 level which is held to signify the difference between economic expansion and contraction, it was rather underwhelming.

The final manufacturing PMI print will be released today at 0900h London time with forecasters now expecting it to be unchanged from the 59.6 flash reading. High euro zone PMIs have understandably helped give the euro (EURUSD, EURGBP, EURJPY, EURCHF) a better bid tone in the last few months but, certainly in the case of euro zone manufacturing, that higher euro is also something of a headwind for euro zone exporters who sell outside the currency bloc. It erodes those exporters’ competitive position. Perhaps that helps explain why the January flash PMI print for the euro zone came in sub-forecast. On January 24, EURUSD was trading on a 1.23 handle rising above 1.25 a day later.

Is it conceivable that the decent performance of the euro last week might yet have a negative impact on today’s euro zone final manufacturing PMI? Could the 59.6 consensus forecast prove over-optimistic?Traders might wish to contemplate that as a risk factor as, at least in the very short term, today’s euro zone final manufacturing PMI number could exert an influence the euro.

Written by Neal Kimberley, External Currency Analyst.