Euro Lifted by PMIs, Dollar Recovered as Health Care Vote Awaited

Euro trades broadly higher today as lifted by solid PMI data. Meanwhile, the greenback also follows even though markets are facing uncertainty on health care vote in House. US president Donald Trump has issued his ultimatum to House Republicans that if the American Health Care Act is not passed today, he will move on to other priorities and leave Obamacare alone. The vote is seen as an important litmus test on Trump’s ability to push through his initiatives. Released in US session, US durable goods orders jumped 1.7% in February versus expectation of 1.2%. But ex-transport orders rose 0.5% only. From Canada, headline CPI slowed to 2.0% yoy in February, below expectation of 2.1% yoy. CPI core common came in at 1.9% yoy, median at 1.9% yoy, trimmed at 1.6% yoy.

Eurozone PMI composite hit near six year high

Eurozone PMI manufacturing rose to 56.2 in March, up from 55.4 and beat expectation of 55.3. Eurozone PMI services rose to 56.5, up from 55.5 and beat expectation of 55.3. PMI composite rose to 56.7, hitting the highest level in six years since April 2011. Markit noted that "the acceleration in growth towards the end of the quarter, as well as improving trends in new business and an increased appetite to hire, suggest that strong growth momentum will be sustained into the second quarter."

Germany PMI manufacturing rose to 58.3, up from 56.8, beat expectation of 56.5. German PMI services rose to 55.6, up from 54.4 and beat expectation of 54.5. France PMI manufacturing rose to 53.4, up from 52.2 and beat expectation of 52.4. France PMI services rose to 58.5, up from 56.4, beat expectation of 56.1. Also from Europe, UK BBA mortgage approvals dropped to 42.6k in February.

ECB chief economist Peter Praet said that policy makers are "more confident on growth". However, "economic outlook is still conditional on maintaining a substantial degree of monetary accommodation. Talks about exit are premature." Praet also said that the forward guidance has served the central bank well. Meanwhile, he noted that "Brexit is regrettable and harmful, but it is also an opportunity for the banking union."

Japan manufacturing PMI missed expectations

Japan PMI manufacturing dropped to 52.6 in March, down from 53.3 and missed expectation of 53.5. Markit noted that "although signaling a slower rate of expansion during March, the latest PMI data again point to a Japanese manufacturing economy expanding at a decent clip." And, "new order books remain in solid growth territory, with gains seemingly supported by the weaker yen." Nonetheless, "this comes at the cost of ongoing marked rises in purchase costs: input price inflation remained close to a two-year high in March."

New Zealand trade deficit narrowed to NZD -18m in February but missed expectation of NZD 160m surplus. For the 12 months through February, trade deficit was at NZD 3.794b, the worst figure in nearly nine years.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0766; (P) 1.0785 (R1) 1.0804; More…..

Intraday bias in EUR/USD remains neutral as consolidation from 1.0824 temporary top continues. Further rise remains in favor as long as 1.0718 minor support holds. Break of 1.0828 resistance will extend the rise from 1.0339 to 100% projection of 1.0339 to 1.0828 from 1.0494 at 1.0983. However, as rise from 1.0339 is seen as a corrective move. We’d expect upside to be limited by 1.0983 to complete the correction. On the downside, break of 1.0718 minor support will turn bias to the downside for 1.0494 support first.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to resume later. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115.

Economic Indicators Update