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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.

Technical snapshot

  • 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.
CHF Pairs Stochastic from MarketMilk
CHF Pairs Stochastic from MarketMilk

Missed last week’s price action? Read the EUR & CHF price recap for May 11 – 15!