The eurozone will see the release of flash PMI figures for the month of March on Thursday at 0900 GMT. All three readings – for manufacturing, services, as well as the composite measure that blends the two sectors – are anticipated to slow down relative to recent releases, though still comfortably remain above the 50 threshold that separates sectoral expansion from contraction.
March’s flash manufacturing PMI is projected to stand at 58.1, recording its third straight monthly decline. In February, it came in at 58.6. The services and composite PMIs are expected at 56.0 and 56.7 respectively, down from the previous month’s corresponding numbers of 56.2 and 57.1, and posting their second consecutive monthly drop.
If the figures come in line with projections, they would point to rising economic activity in the euro area, though they would also leave a bit of a “bitter taste” in the sense that they would indicate further loss of growth momentum after a very encouraging start of the year, and lend credence to analysts supporting that growth in the eurozone has peaked.
The euro benefitted on Monday after a report on Reuters indicated that ECB policymakers’ views are moving further towards the direction of policy normalization, with the Bank’s asset purchase program potentially coming to a halt by the end of the year, and the delivery of an interest rate increase taking place around the middle of 2019. The health of the economy is instrumental for policy tightening and hence upbeat data on Thursday will back this “more hawkish” take by the ECB, likely boosting the common currency. Conversely, expectations of policy tightening could be scaled back if the data miss expectations, and the euro could suffer as a result.
A data beat is expected to provide some support to the euro, with resistance to price advances potentially coming around the 38.2% Fibonacci retracement level of the February 16 to March 1 downleg at 1.2306. The range around this level was congested recently, while it also includes the 1.23 handle that may hold psychological importance. Not far above, the 50- and 200-period moving average lines at 1.2323 and 1.2331 might constitute another barrier to the upside. On the downside and in case of a data miss, the pair could find support around the 23.6% Fibonacci mark at 1.2248; the three-week low of 1.2237 recorded on Tuesday is also part of the area around this point. Steeper declines would increasingly turn the attention to March 1’s two-month low of 1.2153, while the 1.22 handle above – another potential psychological level – might also provide support.
Germany, the largest, and France, the second largest economy in the eurozone will see the release of their respective PMI figures for March on Thursday as well; the former at 0830 GMT and the latter at 0800 GMT. An easing of their corresponding numbers relative to February is anticipated, though again the readings are projected to stand well above the 50 expansion/contraction mark.
Elsewhere, Thursday’s calendar includes a survey gauging the business outlook in France which will be made public at 0745 GMT, while the Ifo Institute for Economic Research will release a similar survey for German business confidence at 0900 GMT; both would pertain to the month of March. In this respect, the ZEW institute’s economic sentiment index for Germany tumbled in March on the back of worries over an escalation of trade tensions, following the recent decision by the US to impose tariffs on steel and aluminum and the ongoing confrontational rhetoric by the country. As a result, the euro recorded losses versus other major currencies. It remains to be seen whether the aforementioned gauges of business confidence will mirror the ZEW’s reading.
Lastly, it should be mentioned that the FOMC monetary policy decision and accompanying statement due later on Wednesday (1800 GMT), as well as Jerome Powell’s maiden press conference as Fed Chief (18300 GMT) are likely to lead to volatility in euro/dollar, potentially bringing into scope the previously mentioned levels that may serve as support and resistance.
