Intraday Market Thoughts

Eurozone PMIs Cast Fresh Shadow on Appetite

by Patrik Urban
Mar 22, 2012 11:56

German and Eurozone PMIs decline; Eurozone industrial orders drop; UK retail sales fell; Swiss trade surplus rose. Market turns to jobless claims, Canadian retail sales, leading indicators, EZ consumer confidence and Draghi press conference. All of our Premium shorts in EURUSD, GBPUSD, AUDUSD & AUDCAD are on track.

The USD is stronger against all majors except the JPY. European equities are losing around 1.3%. JPY is the strongest and NZD the weakest currency today.

The common currency came under heavy pressure after all European March PMIs disappointed. Not only that all readings were below expectations, they were also worse than February results. German manufacturing PMI printed 48.1 from 50.2 and services PMI declined to 51.8 from 52.8. Even though the service sector expanded, new service orders contracted sharply suggesting bleak outlook.

Eurozone manufacturing PMI fell to 47.7 from 49 and services PMI worsened to 48.7 from 48.8. Continued contraction of both sectors hint that the Eurozone will in fact enter a technical recession. Eurozone industrial orders that fell 2.3% in February from 3.5% m/m (-3.3% from -0.4% y/y) cement these fears.

EURUSD dropped from 1.3252 to 1.3132.

The slew of disappointing data continued as UK retail sales declined in February 0.8% from 0.3% m/m which is the sharpest decline since 5/2011. The annual figure fell to 1% from 1.4% y/y. To make things worse, both monthly and yearly January results were revised down. GBPSD fell from 1.5884 to 1.5770

The only positive news today came from Switzerland as the Swiss trade surplus rose in February to CHF2.68 bln from CHF 1.5 bln. Exports soared 9.2% while imports dropped 12.3%.

The NY session kicks off today at 8:30 am ET with jobless claims that are seen marginally higher this week at 353K from previous 351K and with Canadian retail sales for January that are expected to rise 1.8% from previous -0.2% (core sales are seen at 0.5% from 0%).

Other reports will include US leading indicators that are due at 10:00 am and are anticipated higher in February at 0.6% from 0.4% and Eurozone's consumer confidence due at 11:00 am which is expected to slow the pace of a decline to -19.8 from previous -20.3.

Market volatility is likely to increase when the ECB president Mario Draghi holds a press conference at 12:00 pm at the European Systemic Risk Board Meeting.

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