Intraday Market Thoughts

European Data Disappoints Again

by Patrik Urban
May 24, 2012 12:35

German IFO and manufacturing PMI declines; Eurozone PMI disappoint; UK GDP revised lower. Market turns to durable goods orders and jobless claims. Wednesday's Intermarket Insights chart the implications of the breakout in the USDX to 2-year highs, with new trading ideas in EURUSD and AUDUSD. See more below.

The greenback initially gained across the board but has since lost almost all its gains. European equities are gaining over 1% and the relative strength winners are AUD and NZD.

German Ifo indicators all disappointed today as business climate dropped to 106.9 from 109.9; current assessment fell to 113.3 from 117.5 and the expectations sub index declined to 100.9 from 102.7. Highly uncertain conditions due to worsening of the EU crisis has impacted the survey. One of the few positive aspects of today's data is that the Q1 GDP was confirmed at 0.5% q/q.

German manufacturing PMI declined to 45.0 in May which is the lowest level since 06/2009 from previous 46.2 while services PMI remained unchanged at 52.2. Weak reports from the largest European economy imply that eurozone's data deterioration is likely to accelerate. The downward trend has already started as Eurozone manufacturing PMI declined to 45.0 from 45.9 and services PMI fell to 46.5 from 46.9. EURUSD fell to 1.2515 but currently trades around 1.2570.

UK Q1 GDP was revised lower to -0.3% from -0.2% m/m while the annual figure remained unrevised at -0.1%. The sharpest fall in q/q construction output since the beginning of 2009 is blamed for the revision. BBA mortgage approvals rose to 32.4K from 31.9K. GBPUSD initially fell to a new low at 1.5643 but later retraced most of the losses.

The US session starts at 8:30 am ET with durable goods orders that are expected to grow 0.5% in April after declining 4% in March. Core orders should rise 1.1% from -0.8%. Jobless claims that are due at the same time are seen at 372K from previous 370K.

At 9:00 am the market is likely to respond to ECB president Mario Draghi's speech in Rome and FOMC member William Dudley who speaks at 10:30 am in New York.

Wednesdays Intermarket Insights include trades on EURUSD, AUDUSD, USDCAD, gold and US crude oil . DIRECT access to today's Insights is found here: Non subscribers can click here:


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