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Euro Losses on Soft PMI Data May Be Offset By ECB Meeting Minutes

Euro Losses on Soft PMI Data May Be Offset By ECB Meeting Minutes

Ilya Spivak,

Talking Points:

  • Euro May Look Past Soft PMIs as ECB Minutes Dent Stimulus Expansion Bets
  • US Dollar Corrects Lower as FOMC Minutes Fail to Boost Rate Hike Outlook
  • See Economic Releases Directly on Your Charts with the DailyFX News App

May’s preliminary set of Eurozone PMI figures headlines the data docket in European trading hours. The region-wide Composite measure is expected to print at 53.9, implying the pace of manufacturing- and service-sector activity growth held steady compared with the prior month. News-flow out of the currency bloc has increasingly underperformed relative to consensus forecasts over recent weeks however, opening the door for a downside surprise.

The implications of a soft number for the Euro seem uncertain. Investors seemed to interpret comments from ECB Governing Council member Benoit Coeure – who said the central bank will “front-load” its QE asset purchases earlier in the week – to mean the central bank is ramping up stimulus. A close look at Mr Coeure’s remarks suggests he was describing a temporary adjustment in implementing the existing effort – buying a bit more in May and June to account for liquidity conditions in July and August while sticking to an averaging of €60 billion/month – rather than an expansion.

If the market continues to see the size of ECB QE as flexible and potentially due to be expanded in the near term, a soft set of PMI figures may reinforce the narrative and weigh on the single currency. Follow-through may prove short-lived however if minutes from April’s ECB policy meeting serve to clarify that policymakers are not looking to expand accommodation for the time being, triggering a Euro rebound as prices begin to reverse losses sustained earlier in the week.

The US Dollar underperformed in overnight trade, falling as much as 0.2 percent on average against its leading counterparts. The pullback seemed corrective after four days of recovery after minutes from April’s FOMC policy meeting failed to meaningfully advance the case for an up-shift in interest rate hike expectations. Indeed, Fed Funds futures contracts actually revealed a slight outward shift in the priced-in timeline for the onset of tightening.


Asia Session

22:45NZDNet Migration SA (APR)4740-4990
01:00AUDConsumer Inflation Expectation (MAY)3.6%-3.4%
01:30AUDRBA FX Transactions – Gov’t (A$) (APR)-419M--1299M
01:30AUDRBA FX Transactions – Market (A$) (APR)274M-1355M
01:30AUDRBA FX Transactions – Other (A$) (APR)72M-55M
01:35JPYMarkit/JMMA Manufacturing PMI (MAY P)50.950.349.9
01:45CNYHSBC Manufacturing PMI (MAY P)49.149.348.9
01:45CNYMNI Business Indicator (MAY)49.7-48.8
03:00NZDCredit Card Spending (MoM) (APR)-0.6%-0.5%
03:00NZDCredit Card Spending (YoY) (APR)7.1%-5.2%
04:30JPYAll Industry Activity Index (MoM) (MAR)-1.3%-0.4%0.2%

European Session

07:00EURMarkit France Mfg PMI (MAY P)48.548.0Medium
07:00EURMarkit France Services PMI (MAY P)51.951.4Medium
07:00EURMarkit France Composite PMI (MAY P)51.050.6Medium
07:00CHFMoney Supply M3 (YoY) (APR)-2.2%Low
07:30EURMarkit/BME Germany Mfg PMI (MAY P)52.052.1High
07:30EURMarkit Germany Services PMI (MAY P)53.954.0High
07:30EURMarkit/BME Germany Composite PMI (MAY P)53.854.1High
08:00EURMarkit Eurozone Mfg PMI (MAY P)51.852.0High
08:00EURMarkit Eurozone Services PMI (MAY P)53.954.1High
08:00EURMarkit Eurozone Composite PMI (MAY P)53.953.9High
08:00EURECB Current Account SA (MAR)26.0B26.4BLow
08:00EURECB Current Account NSA (MAR)-13.8BLow
08:30GBPRetail Sales ex Auto Fuel (MoM) (APR)0.2%0.2%Medium
08:30GBPRetail Sales ex Auto Fuel (YoY) (APR)3.7%5.0%Medium
08:30GBPRetail Sales incl Auto Fuel (MoM) (APR)0.4%-0.5%Low
08:30GBPRetail Sales incl Auto Fuel (YoY) (APR)3.7%4.2%Low
08:30GBPBOE’s Bailey Speaks in London --Low
11:30EURECB Releases Minutes from April Meeting--High

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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