(News Bulletin 247) – The rebound of the Euro was thwarted, the day after a historic decision by the ECB, by the publication of activity indicators (PMI) which were not very attractive…
A little “brilliance” from the ECB yesterday which, for its first rate hike in a decade, gave a 50 bp turn of the screw, against 25 bp which was until then the option chosen by a large fringe of currency traders.
For Vincent Manuel, Investment Director at Indosuez Wealth Management, “this rise in rates is both a symbol (exit from negative rates, and the largest rise in more than two decades) and a first step. It should be followed by new rate hikes from September, depending on macroeconomic data, with the aim of bringing inflation back to 2% in the medium term. Barring a recession that brings inflation back to this zone more quickly, the ECB should therefore proceed with several additional hikes by December.”
“The resignation of Mario Draghi on the very day of the ECB meeting adds a source of tension and we can assume that the widening of the Italian spread (from 40 to 50 bps since July 20 in the morning) could have been greater without ECB announcement.” adds M Manuel. President Sergio Mattarella decided to dissolve Parliament the day after the breakup of the coalition that had governed since February 2021.
In terms of statistics on Thursday, the targets were missed, slightly it is true for weekly jobless claims, but in very significant proportions for the Philadelphia Fed’s manufacturing index, which stumbles to -12.3 this month.
This Thursday it is the turn of the PMI barometers (surveys of purchasing managers) to animate the debates. All of them missed expectations in the first estimates for the current month, with a black spot: that of German industry, the score falling below the 50 mark, which separates by construction, and as a reminder, a contraction from an expansion of the sector in question.
For Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, “it is in the manufacturing sector, where a lower volume of new orders than anticipated has led to an unprecedented increase in unsold inventories, that the situation is the most more worrisome. Indeed, the deterioration in underlying demand, frequently attributed to higher prices, is likely to induce manufacturers to further reduce production levels.”
To follow figures equivalent to 3:45 p.m. for the United States.
At midday on the foreign exchange market, the Euro was trading against $1.0160 about.
KEY GRAPHIC ELEMENTS
Between potential “remuneration” less weak than expected, and risk of recession, particularly with regard to the weight of German industry, the Euro has seen its rebound, operated since the achievement of perfect parity, dry up, in entering a rebalancing phase, not without volatility, is the chosen option. Neutral opinion issued, avoiding taking positions immediately.
MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).
We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.0000 USD and the resistance at 1.0274 USD.
CHART IN DAILY DATA
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