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Euro May Bounce on PMI Stabilization but Spain and Greece Still Loom

Euro May Bounce on PMI Stabilization but Spain and Greece Still Loom

Ilya Spivak, Head Strategist, APAC

Talking Points

  • Eurozone PMI, Richmond Fed Stabilization May Boost Market Sentiment
  • Spain Bill Sale, ECB/IMF Greece Inspection Threaten to Feed Risk Aversion
  • Australian, NZ Dollars Outperform Overnight on Firmer China PMI Print

The preliminary set of Eurozone PMI figures is in focus. While the numbers are expected to show manufacturing- and service-sector activity contracted again in July, the pace of decline is forecast to show stabilization. This may offer a bit of support to risk appetite considering the recession in the currency bloc amounts to the most significant headwind facing global output this year.

Later in the session, the Richmond Fed Manufacturing Survey is likewise expected to show a narrow improvement. Such an outcome would come within the context of last week’s robust Empire Manufacturing gauge and mostly improved Philadelphia Fed measure as well as yesterday’s rebound in the Chicago Fed National Activity Index. This may begin to feed hopes for a solidifying US recovery heading into the third quarter, which would likewise help support a recovery in risk appetite.

Still, S&P 500 stock index futures are trading effectively flat late into the overnight session, hinting at lackluster conviction. Lingering Eurozone sovereign risk jitters remain a significant overhang, with all eyes on Spain as the country sells a tranche of 84- and 175-day bills. While the short tenor of the debt on offer would typically make for a lackluster outing, the recent focus on Spanish debt woes is likely to assign unusual significance to average yield and bid-to-cover readings this time around. ECB and IMF inspectors are also due to meet in Greece to evaluate the country’s progress on meeting the terms of its bailout, with markets closely monitoring sideline commentary amid fears of an imminent cutoff to Athens’ lifeline.

The sentiment-sensitive Australian and New Zealand Dollars narrowly outperformed overnight, adding as much as 0.5 and 0.6 percent respectively against their US namesake, after HSBC reported that Chinese manufacturing-sector activity shrank at the slowest pace in five months in July. The outcome stoked expectations of an emerging bottom in the downturn plaguing the world’s second-largest economy

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

2:00

CNY

Conference Board Leading Economic Index (JUN)

234.9

-

234.7

2:30

CNY

HSBC Flash Manufacturing PMI (JUL)

49.5

-

48.2

5:03

JPY

Japan Small Business Confidence (JUL)

46.6

-

46.2

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:45

EUR

French Production Outlook Indicator (JUL)

-34

-30

Low

6:45

EUR

French Own-Company Production Outlook (JUL)

-6

-4

Low

6:45

EUR

French Business Confidence Indicator (JUL)

92

92

Low

7:00

EUR

French PMI Manufacturing (JUL P)

45.5

45.2

Low

7:00

EUR

French PMI Services (JUL P)

47.5

47.9

Low

7:30

EUR

German PMI Manufacturing (JUL A)

45.1

45.0

Medium

7:30

EUR

German PMI Services (JUL A)

50

49.9

Medium

8:00

EUR

Euro-Zone PMI Composite (JUL A)

46.4

46.4

Medium

8:00

EUR

Euro-Zone PMI Manufacturing (JUL A)

45.2

45.1

Medium

8:00

EUR

Euro-Zone PMI Services (JUL A)

47.1

47.1

Medium

8:30

GBP

BBA Loans for House Purchase (JUN)

31200

30238

Low

8:30

EUR

Spain to Sell 84-175 day Bills

-

-

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2062

1.2175

GBPUSD

1.5453

1.5593

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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