Date: 21 Feb 2019
Traders and investors will be focused on the release of eurozone PMI data for February this morning, with expectations for a recovery in EU economic activity remaining subdued. The official eurozone PMI composite for February is forecasted to come in close to January’s dismal reading, which marked the trading blocks lowest PMI composite reading since November 2014.
Aside from the overall eurozone PMI composite reading, the German and French PMI manufacturing readings will be the most anticipated releases this morning, following both nations manufacturing sectors falling into contraction during the month of January, prompted by the ongoing slowdown in the global economy.
The German manufacturing PMI is expected to come in below the 50 reading needed for expansion, marking the second monthly contraction in manufacturing activity inside the German economy. The decline in January occurred due to a dramatic fall in new orders, which was the largest drop seen in over six years. Data inside the PMI reading showed that the decline was partly due to slowing international order, although German manufactured goods to China slowed the most.
The French economy, which relies heavily on its car manufacturing and services industries is also expected to post worsening PMI manufacturing and services readings for the month of February, which could signal an upcoming recession for Europe’s third largest economy during the first fiscal quarter of 2019.
The French PMI services headline number showed a worse than expected 47.5 reading last month, which marked the fastest pace of contraction in the countries services sector since early 2014. The yellow-vest protest has started to cause significant disruption to the French business sector, with new business activity falling the most in over half-a-decade.
Investors are closely monitoring the ongoing slowdown underway in the Italian economy, with the nations manufacturing sector in rapid decline. The Italian manufacturing PMI fell to 47.8 last month, weakening even further from December’s 49.2 reading. Italy’s manufacturing sector has posted four straight month’s of contraction, mainly due to a sharp reduction in new orders, investors will have to wait until March 5th for the latest Italian manufacturing PMI reading.
EUR/USD Daily Mount Chart | Source: ActivTrader
Weaker than expected eurozone PMI data for the month of February may already be priced in by investors, with the single currency remaining pressured towards the lower end of its recent trading range against the US Dollar and the British pound currencies. The other key risk event for the euro currency today comes from the release of the ECB monetary policy accounts.
Looking at the EUR/USD pair, key technical support below the 1.1300 level is found at the 1.1240 and 1.1215 levels, while an upside break above the 1.1370 level may accelerate technical buying towards the 1.1410 to 1.1450 resistance areas.
Written by Nathan Batchelor, External Analyst
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