Euro zone PMIs are painting the possibility of a recession
PMI flash services rose to 47.6 in July, versus consensus for 47.1, up from June’s final reading of 47.1. PMI flash manufacturing plunged to 44.1, its lowest level since June 2009, down from 45.1 previously versus a forecast for 45.2 whereas PMI flash composite remained at 46.1 in line with June’s figure as expected.
The service sector contracted for a 6th month in a row, and the manufacturing figure suggested that EZ’s GDP may contract 0.6% in the third quarter in line with expectations for Q2. The decline is mainly due to a gloomy manufacturing activity where companies are reducing their workforce, also slashing their inventory of raw materials to anticipate future weak sales. Companies also tried to reduce prices to boost sales, which should help ease inflation but may hurt profit.
EUR/USD printed a new session-low by 1.2091 after the news hit the wires, but the pair has bounced back and started a short-term bullish signal. The EUR/USD trades around 1.2111 at the time of writing.
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