Euro Weekend Rally Obstructed By Weak PMI Data Set
By DailyFX - 04/23/12 - 4:14 AM EDTBy David Schutz, THE TAKEAWAY: European manufacturing and services PMIs weaker than expected -> Euro continues intraday weakness versus US Dollar, Japanese Yen Weak readings from the French and German services and manufacturing sectors sparked a bout of Euro weakness today. The weighty German manufacturing purchasing managers’ index led losses, coming in at 46.3 versus the expected 49.0. Meanwhile, the French PMI services gauge fell to 46.4 from the expected and previous 50.1. A number below 50 indicates market contraction. Weakness in German manufacturing is of particular concern to many market participants, given Germany’s overall relative strength in the face of the current far-reaching crisis. Germany is also the Eurozone’s largest and most influential economic player. The German economy has thus far resisted recession as ultralow unemployment levels bolster consumer spending and offset a slump in international demand. New orders predictably wakened today’ s number, with particularly weak demand from the European South . The Euro-area composite PMIs also came in weaker than expected, underscoring the Eurozone’s deep-rooted growth issues, as the region’s leaders attempt to juggle lagging growth, burdensome sovereign debt, and inflation’s ever-increasing threat. Today’s weak reading is expected to further complicate the European Central Bank’s task as it struggles to guide the region to economic recovery. Rising energy costs continue to sap consumers’ purchasing power as economies descend into recession and demand drops. The ECB’s Governing Council in its most recent report mentioned a “moderate recovery” since the beginning of 2012, but warned that inflationary risks remain a factor in price action. The Euro weakened sharply against the US Dollar, as today’s release damaged confidence in the single currency and increased fears that the Euro-area’s economy shrank in the first quarter.
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