Risk sentiment favored the lower-yielding euro and franc last week. Will the same hold true this time?
It’s all about the PMI readings again as traders are about to get a glimpse of how the euro zone nations are recovering (or not) from the pandemic.
Here are the potential catalysts to watch out for:
Euro zone PMIs (May 22, starting 8:15 am GMT)
- French flash services PMI to improve from 10.2 to 28.8
- French flash manufacturing PMI to rise from 31.5 to 35.6
- German flash manufacturing PMI to climb from 34.5 to 39.0
- German flash services PMI to rise from 16.2 to 26.2
- Reading above 50.0 indicates industry expansion, below 50.0 reflects contraction
ECB monetary policy meeting accounts (May 22, 12:30 pm GMT)
- Detailed record of the central bank’s latest meeting, providing more insights into the economic conditions that influenced their policy decision
- Dovish remarks hinting at further rate cuts or increased bond purchases could drive the shared currency lower
Overall risk appetite
- There is still some degree of market focus on the COVID-19 pandemic and stimulus efforts to limit its impact, but concerns on the U.S.-China trade war are also influencing risk-taking.
- Fed Chairperson Powell’s views on policy options and economic forecasts can also affect risk appetite.
- More news on reopening economies and concerns over a “second wave” of infections can affect demand for the lower-yielding euro and franc.
- Stochastic shows that euro pairs are mixed, with EUR/CHF and EUR/USD in oversold territory.
- Meanwhile, EUR/GBP and EUR/NZD are looking bearish in the overbought zone.
- Franc pairs are mostly in the neutral zone, based on stochastic.
Missed last week’s price action? Read the EUR & CHF price recap for May 11 – 15!