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US and China Reach Deal in Principle

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EUR/USD Reverses on Worrying Services PMI, ECB's Lagarde Reiterates Fiscal Easing

EUR/USD Reverses on Worrying Services PMI, ECB's Lagarde Reiterates Fiscal Easing

2019-11-22 09:05:00
Justin McQueen, Analyst
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EUR/USD Price Analysis & News

  • Manufacturing Sector Beginning to Stabilise
  • Brief Uptick in Euro Faded as Service Sector Convergence Provides Concern
  • ECB Chief Lagarde Reiterates Calls for Fiscal Easing

BOTTOM LINE

A rather mixed set of PMI figures from both France and Germany, which in turn saw a brief pick up in the Euro quickly faded. The manufacturing sector is starting to show modest signs of stability with both countries reporting better than expected figures, however, Germany remains firmly in contraction territory. The services sector had disappointed with France unmoved at 52.9, while Germany’s services sector dipped to 51.3 from 51.6, marking the slowest growth rate in over 3-years, which in turn saw only a marginal lift in the composite figure. Perhaps more worryingly for Germany is the steady convergence between the weak manufacturing sector and the domestically focused services sector with IHS Markit noting that the lack of employment growth is becoming a concern.

Ultimately, this is unlikely to significantly alter the outlook for the ECB who have continued to maintain the view that fiscal stimulus is needed from those who have capacity in order to increase the effectiveness of monetary policy. This had been aired by the new ECB President, Lagarde, this morning who stated that “monetary policy could achieve its goal faster and with fewer side effects if other policies were supporting growth alongside it”.

Euro-Area Economic Activity Remains Subdued

EUR/USD Reverses on Worrying Services PMI, ECB's Lagarde Reiterates Fiscal Easing

EUR/USD Price Chart: 1-Minute Time Frame (Intra-day)

EUR/USD Reverses on Worrying Services PMI, ECB's Lagarde Reiterates Fiscal Easing

Source: IG Charts

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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