Eurozone Services PMI Improves to the Highest Level in Three Months

Eurozone Services PMI Improves to the Highest Level in Three Months
June 4, 2020

 

The euro rose against the greenback yesterday following the release of better-than-anticipated services PMI data from the Eurozone. However, the data indicated an ongoing contraction of the service sector in the European Union. Notably, the ISM manufacturing data and factory orders data reported from the US also indicated a contraction of the economic activity, but were slightly better than economists’ forecasts. The decline in the US crude inventories created a risk-on sentiment, enabling the euro to rally against the greenback. In the past 24 hours, the EUR/USD pair rose from a low of 1.1160 to a high of 1.1235.

According to a survey report published by Markit, Spanish services PMI rose to 27.90 in May, from 7.1 in the earlier month, and surpassed economists’ anticipation for a reading of 24.70.

Likewise, Markit also reported an increase in Italian services PMI to 28.90 in May, from 10.80 in April. Economists had anticipated a reading of 26.20. The improvement in readings reflects the easing of restrictions and the step-by-step reopening of the economy. However, it stills reflects a contraction in business activity.

French Final Services PMI, as per Markit, increased to 31.10 in May, from a historic low of 10.20 in the earlier month. Economists had anticipated the preliminary estimate reading of 29.40 to remain unchanged. The latest reading indicates another notable contraction in the service sector. The decline in service sector activity was led by a drop in demand.

In Germany, data published by the Federal Employment Agency indicates that German unemployment rose by 238,000 in May, following an increase of 372,000 in the prior month. Economists had anticipated the unemployment to rise by 188,000. The jobless rate increased to 6.3% in May, from 5.8% last month. The reported figure was a notch higher than the unemployment rate of 6.2% anticipated by analysts.

In Italy, the statistical organization Istat reported that the unemployment rate declined to 6.3% in April, from 8% in the earlier month, and surpassed expectations for an increase to 9.2%.

Overall, final services PMI increased to 30.5 in May, from 13.60 in April. The reported reading was higher than the flash reading of 28.70. Economists had anticipated the reading to remain unchanged from the flash reading. It is the best reading posted in three months. Still, the reading indicates that both manufacturers and service providers endured additional significant contractions in their economic activity.

In the meanwhile, the Eurostat reported that the Eurozone purchase price index (PPI) declined 2% in April, compared with a drop of 1.5% in March and missing Consensus estimates of -1.8%.

Eurostat also reported a slight increase in the unemployment rate to 7.3% in April, from 7.1% in March, but beat analysts’ expectations for a reading of 8.2%.

In the US, the ADP (Automatic Data Processing) non-farm employment data indicated that the economy lost 2,760,000 jobs in May, after recording job losses of 19,557,000 (upwardly amended from job losses of 20,236,000) in the earlier month. Economists had anticipated the economy to lose 9,000,000 jobs.

With regard to the non-manufacturing sector, the data published by the Institute for Supply Management indicated that non-manufacturing PMI (purchasing managers’ index) increased slightly to 45.40 in May, from 41.80 in April. Economists had anticipated a reading of 44.20. Still, the reported reading reflects a contraction in the non-manufacturing sector for the second successive month, following 122 months of growth. The Business Activity Index rose to 56 in May, from 41 in April. The New Orders Index stood at 41.9 in May, compared with 32.90 in April. However, the Supplier Deliveries Index fell to 67 in May, from 78.30 in the earlier month.

Similarly, as per the Census Bureau, factory orders declined by 13% m-o-m in April, following an 11% decline in March. The reported figure was slightly better than the 13.7% fall anticipated by analysts.

Finally, the data reported by Energy Information Administration indicated a decline in the crude oil inventories by 2.10 million barrels in the week ended 1st June, compared with an increase of 7.90 million barrels in the earlier week. The market participants were anticipating the inventory to increase by 3 million barrels.

Technically, the EUR/USD pair has started ascending after successfully testing the support at 1.0780. The next resistance is anticipated only near 1.1440. Additionally, the currency pair is also trading above its 50-day moving average, while the Stochastics indicator is in the bullish zone. Therefore, we are anticipating the currency pair to move up in the short-term.

EUR - technical analysis - 4th June 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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