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Eurozone Business Activity Rebounds - A Bottom in Place?

Last updated 3/24/2009 5:15 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

German and French PMI readings improved for the first time in months suggesting that that vicious contraction in demand that dogged  the region over the past year may be showing nascent signs of stabilization. German Manufacturing PMI printed at 32.2 vs. 31.9 eyed while the Service PMI rose slightly to 41.7 from 41 forecast. The French data was better with services rebounding to 42.9 from 40.2 expected and manufacturing registering a reading of 36.3 versus 35 called. The EZ Composite PMI number also rose to 40.1 from 39.2 the period prior.

For Germany the PMI manufacturing gauge rose for the first time in 9 months indicating that perhaps the worst may be over for the country’s critical export sector.  Germany has been mired in the worst economic downturn since World War II with several analysts predicting that the country will see its GDP contract by more than 5% this year.

The region’s fiscal and monetary authorities have been far less aggressive than their US counterparts  in stimulating the EZ economy and so far ECB President Jean Claude Trichet has resisted any attempts to move the central bank towards quantitative easing, insisting that the current plans in place will be enough to revive the moribund European economy.  Today’s data while hardly inspiring does suggest that business activity  in EZ's two most important economies may have found a  bottom for the time being and could validate Mr. Trichet point of view.  Still, the undeniable aspect of today’s reports is that EZ continues to suffer from a very sharp reduction in demand  and even if  the recovery come it is likely to be very slow and tepid.

The currency market showed very little reaction to the news with EUR/USD trading mostly on cross flows form EUR/JPY and EUR/GBP. The pair continues to hold above the 1.3500 level as the market grapples with  the much larger issues of Fed’s quantitative easing and the Geithner plan, but at least for today the micro data will not be a weight on the unit.    

Outlook on EZ Economy

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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.