An important economic indicator of the Euro zone's economic health dropped in May to its lowest level in 16 months despite the efforts of the ECB to boost growth and business activity in the region. The flash Eurozone PMI Composite Output Index indicated that business activity in the 19-country region slid to 52.9 in May from 53.0 in April, failing to meet analysts' expectations for an estimated 53.2. Moreover, a separate research of the bloc's factory arena showed the flash Manufacturing PMI was at 51.5 in May, compared to 51.7 seen in the previous month, while economic forecast was on 51.9. Meanwhile, conditions in the Euro zone services sector remained unchanged as the gauge came in at 53.1, the same as in April, while analysts expected a slight improvement to 53.3 in May. A level below 50.0 signals a drop from the previous month, while a level above signals an increase. Thus, the latest PMIs suggest that economic growth has slowed in the Euro area in the second quarter and that business activity remained subdued. Moreover, earlier in the month, the European Commission lowered its forecast for economic growth across the Euro zone to a 1.8% expansion of GDP for 2016 and 2017, which is ten basis points down from the previous forecast. However, it is considered that investment is likely to pick up next year, rising to 3.8% of GDP, yet unemployment will remain high at 10.3% this year and 9.9% in 2017.
Business activity in the US manufacturing sector continued to decline in May with new orders increasing at the slowest rate so far this year, as manufacturers have been hit hard by a stronger US Dollar and tepid global demand. Markit's preliminary manufacturing PMI eased to 50.5 this month, down from 50.8 in April, when it logged the worst performance since September 2009. The gauge remained well below the post-crisis average of 54.1. A renewed decline in production was one key factor weighing on the headline index in May, alongside softer new order growth and further cuts to stocks of inputs. The data comes at a time when the whole sector has been facing stark headwinds blowing from Greenback's appreciation, a slowing China's economy, and a volatile stock market. Furthermore, lower oil prices have hit manufacturers tied to the energy industry, undermining burgeoning domestic production, lowering demand for steel and drilling equipment and other manufactured products used in the industry. Nevertheless, last week the US Federal Reserve increased expectations for a June interest rate hike by saying the market was not taking the possibility of a hike seriously enough, according to the minutes of its latest policy meeting.
Upcoming fundamentals: German economic activity set to advance in May
EUR/USD in limbo around 1.12
While the bulls have attempted to send the EUR/USD pair above 1.1240 on Monday, their bearish peers tried to close it below 1.1190 amid hike-supportive speeches of Fed officials. As a result, the session was finished with no definite lead of any side at the 1.1220 marker. At the moment we see the exchange rate bounded between the weekly pivot at 1.1250, while the key support is represented by the 100-day SMA and weekly S1 at 1.1161 and 1.1152, respectively. Consolidation beyond any of these areas will shift the present neutral short-term outlook. Daily technical indicators, however, are indicating to the downside.Bears hold to their majority of 55% over bulls
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade at 1.13 by August
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between April 24 and May 24 expect, on average, to see the currency pair around 1.13 by the end of August. Though 56% (+2%) of participants believe the exchange rate will be generally below 1.14 in ninety days, with 41% (+2%) alone seeing it below 1.10. Alongside, 23% (-4%) of those surveyed reckon the price will trade in the range between 1.14 and 1.20 on August 31.