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Mixed EZ PMI Data Provides No Help to the Euro

Last updated 10/24/2011 4:00 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Flash PMI data from Eurozone’s core economies of Germany and France  was mixed providing no clear direction for the market but the EUR/USD remained well bid nevertheless on hopes that progress was being made at the EU summit in Brussels. EU officials appear to have reached an agreement on recapitalizing the region’s banks with more than 100 Billion EUR of fresh capital and are close to determining the final haircuts for Greek debt.

On the economic front risk flows were boosted in earlier Asian trade by the release of Chinese PMI data which showed a rebound back above the 50 boom/bust line to 51.1 from 49.9 the month prior. Meanwhile in Europe the data was decidedly more mixed with French PMI services reading  slipping to a 26 month of 46.0. In Germany the PMI manufacturing gauge also slipped into contractionary territory for the first time in 2 years, but the PMI services  report showed surprising resilience increasing to 52.1 from 49.7 - its best reading in 4 months.

Overall the news from Europe shows that economic activity is clearly slowing as spillover effects from the financial sector are beginning to take their toll on the real economy. However, the damage looks to be relatively contained so far and EUR/USD continues to hold its bid  on hopes that the EU summit will provide a comprehensive resolution to the financial crisis in the region resulting in rebound in growth by the end of the year. If however, sentiment sours as little progress is made, the EUR/USD will become much more vulnerable to a steeper selloff as hope for stabilization fades and the reality of negative growth in the EZ begins to set it.  

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.