Investors turn their attention to today’s Purchasing Managers’ Indexes which will be released throughout the day. Due to the event's importance, indices and currencies are experiencing higher volatility throughout this morning’s European Trading Session. The main surprise has again come from the UK, which supposedly is the economy at the highest risk of recession.
France and Germany were the first countries to release their Purchasing Managers’ Indexes. So far, the Euro, DAX, and CAC have negatively reacted. Data announced confirmed below:
🟢 French Services PMI - 52.8 vs. 49.7, previously predicted
🔴 French Manufacturing PMI - 47.9 vs. 51.0, previously predicted
🟡 German Services PMI - 51.3 vs. 51.3, previously predicted
🔴 German Manufacturing PMI - 46.5 vs. 48.0, previously predicted
GBP/USD
The GBP/USD is experiencing the highest level of volatility this morning increasing in value by 0.97% since the announcement. The Pound is also increasing in value against the Euro, Japanese Yen and Swiss Franc. The main drive is the Purchasing Managers’ Index which came in much higher than expected for the Manufacturing and Services sectors.
When monitoring technical analysis, the price broke through the previous swing high formed 1.20560, indicating further upward price movement. Other trend-based indicators are also providing bullish signals. For example, all major moving averages have crossed upwards on the 30-minute chart and the Stochastic Oscillator. Additionally, the Relative Strength Index is priced at 73.30 on the 15-Minute chart, which indicates the price is being dominated by buyers but not yet overbought.
However, the exchange rate slightly retraced 30 minutes after the PMI announcement. Traders will be looking to see if the asset can maintain its bullish momentum throughout the day. The UK’s PMI has come in higher than their German competitors for the first time since October 2022 and September 2022 for France.
The UK’s Services PMI came in at 53.3, the main driver of the bullish trend as the UK market comprises services. The announcement is positive for 2 reasons. The first is that the index increases above 50.0, indicating that the economy has a strong chance of seeing stronger economic growth. The second is that the figure is significantly higher than the 49.0 economists expected. The Manufacturing PMI came in 1.7 points higher than investors were anticipating.
Lastly, investors must be cautious that the US will still release their Services and Manufacturing PMI. The US indexes will be released this afternoon after the opening of the US trading session.
USD/JPY
The price of the USD/JPY continues to move within an upward trend pattern as it again attempts to form a higher swing high. The asset’s price so far today has increased by 0.39% and is edging closer to the previous high of 135.10. The US Dollar has not yet been influenced by any economic event this week but this will change with the US PMI being released this afternoon.
The price on a 4-Hour chart also maintains signals of bullish price movement, with the asset trading above the 100-day and 50-day Moving Averages. The stochastic oscillator has also crossed upwards and is priced at 53.47, and both give signals of potential bullish price movement. Though as mentioned above, even though technical analysis is vital, the price will be partially driven by the PMI announcement this afternoon. The Services PMI is expected to rise to 47.3, and the Manufacturing Sector to 47.4.
In the absence of economic events related to the Japanese economy, investors are focusing on appointing the new Bank of Japan Governor, Mr. Ueda, whose candidacy the parliament will approve in the near future. The new governor is likely under immense pressure to change the bank policy, which has been in the ultra-stimulus zone for over a decade. The first thing on investors’ minds will be Japan’s Yield Curb Control. According to experts, the bank will face high-level selling in the bond market if no change is made. This can negatively affect the Yen once again.
Summary:
- The UK’s Pound significantly increase in value after the latest PMI reports for the Services and Manufacturing sectors. The Pound increases by just under 1%.
- The Services PMI, which increased above 50.0 and was higher than investors expected, supports the Pound.
- The European Union sees mixed PMI reports as the Euro and Indices declined during this morning’s European Session.
- The Japanese Yen may come under pressure if the new Bank of Japan Governor refuses to alter the Bond Yield Curbs.
