Euro Sinks on Soft PMIs, May Fuel ECB Stimulus Bets

Talking Points:

• German-Services PMI 54.0 in March vs. 55.5 Flash Results
• Eurozone Manufacturing, Services and Composite PMIs In-Line with Estimates
• Euro at Risk for Further Losses on ECB Stimulus Expansion Bets

Preliminary sets of March German and Eurozone PMI figures were released earlier in the European session. German PMI data greatly disappointed as service-sector activity fell to a 2-month low, and factory-sector activity fell to a 4-month low. Consequently, Flash Germany Composite Index reported at 55.0 in March, down from 56.4 in February.

Eurozone PMI data reported in-line with flash estimates and showed service- and factory-sector activity growth slowed for the first time in four months. Flash Eurozone Services PMI Index reported at 52.4 (2-month low) in March and Flash Eurozone Manufacturing PMI Index came in at 53.0 in March (3-month low).

Despite data reported in-line with flash estimates the Euro sank against 5 of its 7 major peers. According to DailyFX Strategist, Ilya Spivak says signs of softer performance may drive speculation about deepening disinflation. As a result the result the Euro may come under pressure on ECB stimulus expansion bets. Nonetheless, as the PMI index does not directly affect monetary policy follow through may be limited.

EUR/USD 5 min Chart - March 24, 2014

Chart Creating Using FXCM Marketscope 2.0

-- Written by David Maycotte, DailyFX Research Team. Questions, comments or concerns can be sent to [email protected].

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