German Manufacturing PMI Hits Lowest Level This Year, Raising Concerns

Negotiations between the US President and the House speaker ended with no deal, but both parties remain optimistic. The US Dollar Index this morning increased in value after retracing the day as many investors go for safer options. In addition, both the Euro and Pound come under pressure from this morning’s Purchasing Managers’ Indices. The PMI reports are indices based on a monthly survey among the country's most important purchasing managers. The survey looks at multiple economic elements, including supply, employment, and new orders, for example. The index is deemed to be a good indication of whether the economy will decline or experience growth. 

Moving away from the currency market, the price of Gold has continued to decline over the past 24 hours. This is due to the US Dollar appreciating in value. In addition, an interest hike is still possible in June, according to Bullard, who spoke with journalists yesterday evening. This has also piled pressure on the safe haven asset. Meanwhile, the US Treasury Department warns that the deadline for negotiations3 is edging nearer. According to the Treasury Secretary, Yellen, the federal government will only be able to fully service its debt if Congress increases or suspends the national debt limit. 

House Speaker, McCarthy, advises he will give MPs a mandatory three days to study the details of the proposed deal. If negotiations do not produce fruitful results, which is unlikely, traders will study Gold’s reaction, which is likely to be different from the previous week’s price action. 

Lastly, the price of the SNP500 and NASDAQ again rose, returning to the previous highs. The only struggling US index was the Dow Jones, which formed a head and shoulders pattern and saw weaker order flow. The component experiencing the strongest decline within the Dow Jones was Nike, declining by 3.99%. The best-performing component was 3M Co. This morning, all three indices point lower during the futures market, as have European indices. Stock market investors will be hoping for a strong indication of a pause in the monetary policy during tonight’s meeting's minute report. Talks of a further hike can potentially pressure the stock market further. In addition to this, investors will also have their eyes fixed on tomorrow’s NVIDIA quarterly earnings report. 

EUR/USD - German Manufacturing PMI Hits Lowest Level This Year

The exchange rate price has come under pressure this morning from the PMI release in France and Germany. However, traders should note the exchange rate is performing better than the GBP/USD. The Euro, in general, is experiencing mixed price movement but is performing best against the Pound. The Pound throughout the day is declining against all currencies. The EUR/USD this week is experiencing a trendless market with the price reverting each time the price forms an impulse wave. For this reason, trend traders await a clear direction in the price action to enter the trend. 

When looking at technical analysis, the price is trading around the longer-term moving averages, which have formed a trendline recently. In addition, the exchange rate price has been trading at the neutral line within the Bollinger band, and the same applies to the RSI. Similar to the price action, indications also point towards a temporary sideways trend. For stronger trend indication, traders will look for breakouts at 1.07815 or 1.08291.

EUR/USD 30-Minute Chart on May 23rd 

The French Manufacturing PMI came in a 46.1, but the Services PMI read 52.8, significantly lower than the 54.0 investors expected and lower than the previous month.  The German Manufacturing PMI was lower than expected at 42.9, considerably lower than the 50.0 benchmarks and the lowest this year. The German Services PMI came in higher than expected. The European PMI outcomes had positives and negatives, but the main concern for investors was the German Manufacturing PMI, which was significantly lower. 

Investors will now turn their attention to the US Purchasing Managers’ Index this afternoon and tonight’s FOMC Meeting Minutes. If the PMI data comes in higher than investors expect, the Dollar price may further strengthen. In addition to this, investors will be hoping for further indications within tonight’s meeting minutes regarding if an interest rate hike is possible or if only a pause had previously been discussed. 

Summary:

• Negotiations between the US President and the House speaker ended with no deal, but both parties remain optimistic
• The US Dollar Index this morning increased in value after retracing the day as many investors go for safer options.
• The Euro and Pound come under pressure from this morning’s Purchasing Managers’ Indices. 
• The German Manufacturing PMI was lower than expected at 42.9, considerably lower than the 50.0 benchmarks and the lowest this year.