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#1 16-12-2020 13:39:09

Admin & Trader
From: Paris - France
Registered: 21-12-2009
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EUR/USD: european PMI's beat expectations and send the pair above 1.22

EUR/USD: european PMI's beat expectations and send the pair above 1.22

The Euro-Zone PMIs released on Wednesday exceeded expectations. The Services and Manufacturing data showed an improvement in the situation, and the EUR/USD celebrated this by jumping above 1.22. The EUR/USD pair was the only major currency pair in the Euro-Zone to show a positive trend.

The funny thing so far is that only the EUR/USD pair reacted, as the Euro crosses didn't participate. Therefore, we can conclude that the EUR/USD exchange rate rise just after the release of the PMI index is not related to the PMI index, but is just another step below the dollar pairs. Indeed, the AUD/USD also rose, as did the GBP/USD - and this has nothing to do with the PMIs of the Euro zone.

What do the PMIs show?

Europe is being tested for the second time during the virus situation. The second wave of infections has resulted in a record number of deaths in Germany, and the trend continues to grow. Germany and other European countries are therefore entering severe containment with restrictions designed to last until the end of the winter holidays.

Despite a difficult winter in terms of production and economic performance, PMIs were surprised by the increase. It should be remembered that these are diffusion indices that refer to activity compared to the previous month. In any case, performance should not be ignored. In the case of the manufacturing PMI, for example, the data reached its highest level in 31 months. Services also surprised to the upside, although they remained in the contract territory. Data for the sector stood at 47.3, below the 50 level but well above the previous 41.7.

In other words, Europe is entering the holiday season, and severe containment measures are in better shape than expected. What we mean is that everyone has set their prices in a terrible environment, and today's data makes it a little easier to look ahead to the period ahead.

However, in the financial world, PMIs are just a drop in the ocean. This is particularly true in a situation where the Fed must intervene in a few hours and the world is paralysed by a pandemic.

Thus, today's reaction on the EUR/USD may have nothing to do with PMIs, but with the dollar. Keep in mind that after today's event, most trading centers around the world will go into vacation mode, with a slow but sure depletion of liquidity.

Expect that the end of this trading week will be crucial for the currency market and the US dollar. After that, the stock market will take over.

"Anything worth having is worth going for - all the way." - J.R. Ewing



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