VOT Research Desk
Oct 24,2022
Market Insights, Considerations & Analytics
Key Points for the Eurozone PMI:
29-month bottom for the Eurozone S&P Global Manufacturing PMI Flash (OCT): 46.6 vs. 48.4 in September.
20-month low for the Eurozone S&P Global Services PMI Flash (OCT) 48.2 vs. September 48.8.
Four successive months of decreased business activity.
Based on the ‘flash’ figure, the seasonally adjusted S&P Global Eurozone PMI Composite Output Index decreased from 48.1 in September to 47.1 in October. The indicator indicated that business activity in the eurozone has fallen for a fourth time in a row. The most recent result was the lowest since April 2013 when pandemic numbers were excluded.
As factory outputs and service sector outputs fell for a 5th and 3rd consecutive months, respectively, the manufacturing sector took the lead in the slump. The composite PMI fell to 44.1, its lowest level since 2009, marking the greatest decrease in Europe’s most industrialised economy (excluding the pandemic). Business projections for the coming year were dim, which put more strain on the zone. That since early pandemic lockdowns, aspirations are at their second-lowest level. Manufacturing, especially in Germany, saw unusually low levels of confidence, which can be attributed to worries about energy as well as the growing cost of living and slowing global development.
How aggressive will the European Central Bank (ECB) be this week given that the Euro remains below parity with the dollar? A 75bp increase is already anticipated by the market for the meeting on Thursday, although it is unlikely to have much of an impact on the euro. The Eurozone’s generally dismal outlook is unlikely to shift as today’s data strengthen recessionary fears. It is highly challenging to argue for a halt in rate increases as long as inflation stays high, with ECB Chief Economist Phillip Lane saying the bank views the neutral rate as being just above the 1-2% range. If Lane is right, more rate increases would be coming for the zone, which theoretically might exacerbate a recession.
The initial response to the data had seen the EURUSD pair lose 20 pip until leveling off, with potential for more loss as the day goes on.
The pair encountered resistance after touching the 50-SMA on the daily timeframe, and we are still inside the symmetrical triangle formation. As we approach the ECB meeting on Thursday, there remains a good chance that the price will stay within the triangle pattern’s 150-pip range.
Important Intraday Levels to Monitor:
Support Areas
0.9800
0.9750
0.9700
Resistance Areas
0.9900
1.0000
1.0138
