Little Changed in the EURO after PMI release

Data released today have shown a slump to a 3 month low in the Markit Eurozone flash PMI index as it was reported to be 51.8 from a previous reading of 52.0, while the services sector reached a 3 month high of 53.1 after a previous 52.9. The output for the entire composite grew to a 7 month high of 53.3, despite the fact that this was just a marginal climb from its previous reading of 53.2 with all figures close to market expectations. Even with a gain in output reported for the 2 sectors, there was a lot of contradictory readings in the data.

The Rate of new businesses in the services sector was at its peak in 4 months, while the manufacturing orders growth witnessed a slowing as it posted its most sluggish expansion rate in 18 months. Manufacturing inventories also posted a major decrease at its fastest rate in 6 years as confidence was in its decline. There was however no evidence of a major negative effect of the Brexit vote on the Eurozone economy.

The French services sector also posted a substantial increase, but there was another general faltering in growth outside Germany. Employment showed an overall growth for the month of August, despite its rate of expansion being the weakest in 3 months.

The overall business anticipations in the EU services sector fell to its lowest level since December 2014, which is very surprising in light of the highly supportive monetary policy and there will be future worries over structural failures.

Prices of inputs which were reported higher than its previous reading, have climbed higher for 5 months consecutively, as output prices stage a steady decrease at a faster pace than reported in July. A progressive fall in output prices will lead to fresh worries within the European Central Bank (ECB), mostly due to their attentiveness to inflation projections.

Although the overall data signifies a progressive growth in the 19 bloc Eurozone economy, the Euro area has mostly failed to achieve an undoubtable escape from the prospect of weak economic growth due to the appearance of more negatives than positives in the survey. The Euro stood unchanged in the moments following the data release, as bunds slumped into the red. The most significant reaction was seen in equities as the Eurostoxx 50 index mounted a move further into the green by around 0.9%.

Analysts had stated before the release of the data that even a positive release is least likely to spur any major moves in the Euro, Ilya Spivak, a Currency Strategist at DailyFX stated that, “On balance, results in line or even better than economists’ expectations are unlikely to alter the trajectory of ECB monetary policy, undermining their ability to drive lasting Euro momentum. On the other hand, a downside surprise may speak to the central bank’s pledge to boost stimulus if necessary and apply pressure to the single currency.”