Truly Horrid German Data


French and German PMI readings disappoint as Bunds rally. French preliminary PMI readings for March came in much weaker than expected, with the manufacturing number falling back to just 49.8 from 51.5 and the services reading to 48.7 from 50.2. Both readings are now in contraction territory. The German manufacturing reading fell back to just 44.7 from 47.6, which will add to fears of a recession in the manufacturing sector. The services reading held up, but also declined versus February – to 54.9 from 55.3.

The overall Eurozone Composite PMI at 2 month-low of 51.3 in the preliminary March reading, as manufacturing indices fall to 71-month lows and point to recession in the sector. The services PMI reading was little changed at 52.7, versus 52.8 in February, while the Manufacturing PMI fell back to 47.6 from 49.3 and the manufacturing output index at 47.7, down from 49.4 in the previous month. The glimmers of hope that we saw in February confidence readings and the March ZEW number were proved wrong and Markit reported that the economy had lost momentum again, with manufacturers reporting the steepest downturn in six years. Markit also reported that stagnant order books and gloomier future expectations translated into reduced hiring. The first signs then that the labour market is being affected by the slowdown in the manufacturing sector, which has been hit hard by geopolitical tensions, while the weak data at the time of the Brexit debate and ahead of the upcoming European Parliament elections could well add to political tensions not just in the Eurozone.

The common currency suffered across the board. EURUSD breached the key 1.1300, EURJPY sank over 120 pips from 126.00 to 124.76 and EURGBP moved to day lows at  0.8613.

EURUSD is now back in the 2019 down channel, has given up the 1.1400 handle and trades lower than the pre-FED levels on Wednesday (March 20). RSI and Stochastic have also rolled over and with S3 at 1.1235 and the March low at 1.1170 pressure is biased to the downside. A break back over the 20-day moving average at 1.1325 and the daily pivot/tend-line confluence at 1.1385 would be required to suggest any upside.

The close today will be interesting with a raft of US data later covering PMI’s, Housing and Inventories.

Stuart Cowell

Head Market Analyst

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