German manufacturing PMIs miss on expectations, sending EUR lower
This morning's focus was on the German manufacturing PMIs, which in March saw the index dropping to a 44.1 low. Markets were looking for a modest rebound to 45.0, so at 44.5, the recovery was not nearly enough to ease fears that the European slowdown could develop into something more significant down the line.
The market has been pretty comfortable with the spot price action around the 1.1300 mark in EUR/USD - this in spite of the ECB story that some policymakers consider the growth outlook for H2 to be too optimistic. The move generated a brief move down to 1.1280 before recovering, so we can see that traders were waiting for this number before showing more conviction.
From here, we are watching the 1.1250-60 zone, and then 1.1230 after that. We also have to keep a close eye on EUR/CHF, which is sticking close to the 1.1400 area, and this is assumed to be largely down to SNB smoothing operations to keep the CHF from appreciating too far.
EUR/GBP is also a factor, where GBP weakness is being expressed through this rate, and we can see this by the fact that Cable has also been dragged lower towards the 1.3000 level.
Earlier in this morning, French manufacturing PMIs came in at 49.6, below the 50.0 expected so this is also contractionary.
However, services PMIs in Germany printed an expansionary 55.6, with 50.5 recorded in France to the non-manufacturing sector is tempering some of the weakness above.