Resilient Euro: ECB Unfazed by PMIs as Inflation Takes Center Stage
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EUR: PMIs hardly a game-changer for the ECB
The ECB had to resist two main dovish arguments at the June meeting: a faster decline in inflation, and signs of slowing growth outlook. The second will be tested again today with the release of PMIs. Consensus is looking at declining services PMI for a second consecutive month in the euro area and Germany, while manufacturing is seen holding up better. The composite EZ gauge is expected to decline very marginally from 53.9 to 53.3.
At this stage, it will probably take a pretty clear sub-consensus surprise print to prompt a materially negative euro reaction. The ECB has demonstrated it is firmly focused on inflation, and the debate around a September hike (a July one should be a done deal, according to President Christine Lagarde) does not seem likely to take these surveys under much consideration.
The euro is showing more resilience than other activity currencies to the rebound in the dollar, and barring big downside surprises in PMIs may hold above 1.0900 into next week.
