Global macro overview for 24/07/2018
After a clear cooling of the economic situation in the first half of the year, the beginning of July brought a stabilization of the growth rate in the Eurozone at a moderate level – according to the latest PMI readings.
According to the IHS Markit, the combined PMI index for the Eurozone industry and services sector in July was 54.3 points. This result is lower than June’s 54.9 points and the second lowest result since November 2016. This is a flash reading, based on approx. 85% of surveys sent to various enterprises.
The services sector disappointed: the PMI index reached 54.4 points compared to 55.2 points in June versus 55 points expected by economists. An analogous indicator for the Eurozone manufacturing sector was 55.1 points and was slightly higher than a month earlier (54.9 points) and higher than expected by economists (54.6 points).
Basically, these are not bad results, because PMI ratios above 50 points signal an increase in economic activity in the surveyed sector, so the current readings of 55 points still point to the ongoing economic recovery. Only that we are comparing the most recent data to the state at the end of 2017, when the European PMI indications reached 60 points and recorded 17-year highs. The question remains whether they will ever return to this levels.
Let’s now take a look at the EUR/USD technical picture at the H4 time frame after the data were published. The market went towards the level of 1.1662, which is a 50% Fibo retracement and then jumped back towards the level of 1.1700. No major breakout occurred, so the price returned to the middle of the intraday range between the levels of 1.1655 – 1.1710 as the momentum remains neutral.