Date: 25 Jul 2018

As Dutch bank ING noted on Tuesday “the flash composite PMI for the Eurozone fell back to 54.3, after the brief uptick to 54.9 in June. This was slightly below the consensus estimate.”  While the figure is still reflective of a solid Eurozone recovery, it’s not representative of a stellar performance. Another, albeit small, downside miss to a piece of Eurozone data only serves to re-emphasise that Surprise Index measures for the Eurozone, though way off their worst level, remain in negative territory. So, where Eurozone data is currently not meeting consensus expectations, it is still more generally under- rather than over-shooting those consensus expectations. That fact won’t be lost on Eurozone policymakers and possibly not on traders. It’s arguably hard for the euro to generate too much of a head of steam on the topside versus the USD when markets are fully aware that while Eurozone economic growth is solid, the current pace of US economic growth seems to be much stronger. Euro bulls might feel their efforts will be better rewarded through a cross. If speculation, that next week’s Bank of Japan meeting will lead to less loose Japanese monetary policy, recedes then perhaps EURJPY might be one cross that traders will examine more closely.

by Neal Kimberley, External Currency Analyst.