Eurozone PMI Preview: Contraction in-line with expectations to be good news for the euro

This Tuesday at 08:00 GMT, Markit will publish the preliminary estimates of the EU manufacturing output and services activity for June which are seen recovering further but still in contraction territory. As the market has priced in economic contractions in all major economies just an awful reading would shatter the euro, FXStreet’s Chief Analyst Valeria Bednarik briefs.

Key quotes

“The services sector is the one expected to have improved the most. For the EU, the index is seen improving from 30.5 to 40.5 Manufacturing output is foreseen at 44 after printing at 39.4 in May. The Composite PMI is foreseen at 41 from 31.9 previously. A similar improvement is seen in Germany and France, the two largest economies from the region.”

“Contraction, although in-line with the market’s expectations, should be read as good news for the EUR. Worse than anticipated numbers, closer to previous than to forecasts while fuel fears of a slow and painful path ahead towards the economic comeback, hence, hurt the shared currency. However, the outcome of the Markit reports needs to be extremely discouraging to have a sustainable bearish effect on the EUR.”