(News Bulletin 247) – A lesser dispersion was notable between the main classes of risky assets, commodities, equities and the Euro, mainly, reflecting the increasingly strong probabilities of an entry into recession of the main economic poles on both sides. else from the Atlantic. The “Composite” PMIs, published yesterday, sent a clearly pessimistic message.
The services PMI in final data for the month of June in the Euro Zone came out at 53 points, barely above the first estimates, leaving a margin now tenuous with the 50 points which separate, by construction, an expansion from a contraction. of the sector in question. We therefore have the composite data (industry included), which comes out at 52.0 (54.8 in May), the lowest for 16 months.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence comments on the latest figures from the PMI survey: “The sharp slowdown in activity growth observed in June in the euro zone increases the risk of a contraction in the region’s economy in the third quarter June’s PMI is in line with a quarterly GDP increase of just 0.2%, the survey’s forward-looking indicators such as the new orders and sales indices outlook for activity, which is also trending downwards and thus presaging a decline in activity in the coming months.The manufacturing sector has already tipped into contraction territory, with production having fallen for the first two years in June, while activity in the services sector suffered a marked slowdown against a backdrop of soaring inflation and a consequent increase in the cost of living.
“The latest PMI data therefore underline a sharp increase in the risks of economic contraction in the euro zone even as inflationary pressures are easing but remain very marked”, he summarizes.
“The uncertainties obviously create great volatility on the markets, but we can clearly see that the discourse which is gradually becoming dominant is that of the recession” coolly observes Xavier Chapard (LBPAM). The very recent ebb in the price of hydrocarbons brings only a very relative relief. And “it is indeed in Europe that tensions on the energy market remain the greatest. Indeed, faced with the risk of even greater cuts to come from Russia, the price of gas has rebounded very strongly. These tensions are likely to persist, which will constrain European growth. The bad news has been amplified by strikes in Norway which could limit gas supplies.” continues M Chapard.
To follow the Minutes of the Fed at 8:00 p.m. On this last point, ECOFI analysts and strategists summarize the situation with the following aphorism: “It is not good to be a central banker this summer!” The Minutes, the traditional minutes of the Fed’s last FOMC meeting, will be studied closely. As a reminder, following the last meeting of the Monetary Policy Committee, the Fed Funds were raised by 75 basis points, a scenario which had been (very partially) digested by the market.
Also to follow on the other side of the Atlantic are the new job offers (JOLTS) at 4:00 p.m., the PMI ISM Services at 4:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0220 about.
KEY GRAPHIC ELEMENTS
The spot is breaking out of a fragile neck line of a chartist pattern, which sends a clear bearish message. Our immediate objective is to achieve, in growing volatility, the perfect parity, namely one euro for one dollar. If necessary and in the long term, a powerful rebound could take shape.
MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).
Our entry point is at 1.0202 USD. The price target of our bearish scenario is at 1.0001 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0301 USD.
The expected return of this Forex strategy is 201 pips and the risk of loss is 99 pips.
CHART IN DAILY DATA
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