Eurozone PMIs Preview: EUR/USD has room to rise in response to the data

Eurozone PMIs, which provides a snapshot of how the old continent is coping with the second wave of lockdowns, are set to show a drop in activity due to lockdowns, with a significant blow to the services sector. There a re three reasons why expectations are too low, according to FXStret’s Analyst Yohay Elam, and EUR/USD, which has been making its way toward 1.19, may rise. 

Key quotes

“The all-encompassing eurozone composite PMI is set to fall from 50 – the level separating expansion and contraction – to 46.1 points.”

“Pfizer and BioNTech announced their COVID-19 candidate is 90% efficient on November 9, on time to be factored in by Markit's surveyors. While any immunization scheme has production, storage, and distribution hurdles, having this ‘light at the end of the tunnel’ is a considerable boost to morale that could lead to a better PMI.”

“Contrary to the panic shuttering of the economies in the spring, the public, medical staff and governments are far more prepared for the winter wave. Moreover, Germany's lockdown was described by officials as ‘light.’ France has been under stricter measures, yet these have been bearing fruit, potentially also feeding into business confidence.” 

“While they forecast the general direction of travel in the past three months – to the downside – the outcome beat estimates. Will recent history repeat itself for the eighth time in a row? A sharp plunge of nearly four points seems inconsistent with recent declines, leaving room for an upside surprise.”

“Upbeat PMIs, especially the one from Germany's manufacturing sector and the composite read, could lift the common currency.”