EUR/USD: today's Eurozone PMI index could agitate the forex

Preliminary European PMI (Purchasing Managers Index) figures are expected in a few hours, and are likely to exceed expectations.

A positive surprise should support a rise of the EUR/USD, especially if we see figures above the 49 level.

Forecasts, however, do not support any PMI above the 49 level. As a reminder, when the PMI index is above this area, it shows an expanding economic sector, while below this level, it shows a contraction. Naturally, as a result of the virus situation and economic bottlenecks, European consumer confidence indices have fallen considerably.

PMI rebound will continue

The PMI index for manufacturing is expected to rise from 40.0 to 44.1, while the PMI index for services is expected to rise from 29.9 to 39.8. Although they are both well below the expansion threshold, there may be some positive surprises, especially in terms of regional figures.

Traders are still looking at the major economies of the euro area and interpreting the regional data together with the consumer confidence indices for the euro area as a whole. Specifically, data from Germany and France often move markets more than the euro area's real consumer price index.

Since these two countries are the economic engine of Europe, the improvements in these two countries point to future spillovers to other economies. Forward-looking market participants are the first to react to such deviations. Judging by last week's ZEW publication, it is likely that German consumer confidence indexes will continue to recover, perhaps even in expansion territory.

Europe is being closely watched by the rest of the world, especially by the U.S., which is reopening its doors after a lockdown period. These closures have gone through several stages of implementation, from very drastic in some countries (e.g. Spain and France) to more flexible (e.g. UK).

As summer has just started, Europeans are getting ready to spend some of the money that they didn't spend during lockdown.

The key point here is that, slowly but surely, the world is learning to live with the Covid-19. Economies cannot be shut down forever, and life must go on.