Eurozone Manufacturing PMIs are proven to be disappointing. As the result, Euro depreciated against major currencies, including USD. JPY, GBP, and AUD.

Eurozone Manufacturing PMIs are proven to be disappointing. France Manufacturing PMI fell from 49.6 to 47.8. Eurozone Manufacturing experienced similar event as the previous 53.4 dropped to 51.9. Meanwhile, German Manufacturing PMI moved up slightly from 52.3 to 52.4, still under consensus expectation. As the result, Euro depreciated against major currencies, including USD. JPY, GBP, and AUD.

euro

ECB-In-Waiting

Two weeks ago, European Central Bank (ECB) have announced a string of measures, including benchmark rate cut, as preparation for further easing. The step shifted Euro outlook in mid-to-long term. Euro tumbled for a time on that point, but stabilized above 1.3500 along with the predictions that ECB will only launch stimulus two months again at the fastest.

Many opinioned that rate cut will not be able to dampen the pressures of falling inflation in the area. Nevertheless, just like any other central banks, ECB prefers to be prudent and wait till the influence of the previous measures emerge in the economy. On the other hand, this week we will see a number of mid-to-high impact fundamental news release from Eurozone, particularly, PMI, German IFO, consumer confidence, and CPI. Analysts generally do not expect significant improvement, but they commonly see the Euro in neutral territory for now.

 

EURUSD Consolidated

Kathy Lien from BK Asset Management mentioned that after the drop in the latest German ZEW, there are downside risk from Eurozone reports. Whether EURUSD will be able to survive or not this week shall depends entirely on Eurozone reports. But on the long term, the US economic calendar will hold greater influence. The reason is while ECB must implement easing, but the implementation is driven by necessity. On the other hand, The Fed most assuredly will normalize their policy in the upcoming months as stimulus reduction died out.

Danske Bank have also predicted the fall in Eurozone Manufacturing PMI. Furthermore, they stated, fundamentals are still moving in favour of the USD relative to the EUR. However, with the Fed maintaining a soft rhetoric, EUR/USD is likely to stay stable for now. But EURUSD speculative positionings seemed like increasingly stretched, provides a possible barrier for further near-term decline in EURUSD. The stretched EURUSD shorts too indicates that it is susceptible to correction.

Christopher Vecchio from DailyFX have claimed that Euro is on the verge of decline on 21 June. Euro has seen little impact from ECB easing measures. He pointed out that market attention will turn to German inflation that is predicted to show modest improvement from May deflation. ECB have mentioned that further easing will be done if inflation worsens. Therefore, the release of this data will have to be given special attention.