From the point of view of macroeconomic data, Wednesday is a very important day, because it is today that preliminary PMIs for individual economies appear. Investors are looking for answers to the question of whether they will be able to maintain the pace of recovery before the autumn after the summer.
The data may be of a pricing nature, such as a report from Germany showing a significant increase in manufacturing PMI, which could improve the mood on the German stock exchange and help the DAX index grow today. The manufacturing PMI index rose to 56.6pts from 52.2pts in August, IHS Markit's data showed. This was a better result than a consensus of 52.5 points. The publication pointed to the highest activity in German factories since July 2018. Moreover, the confidence of manufacturers in their future operations also increased in September, i.e. they reduced their concerns about a second lockdown and factory closures.
Unfortunately, the situation in the service sector was completely different. Preliminary data from Germany showed an increase in concerns about the future and a drop in PMI in September to 49.1 points from 52.5 points a month earlier. Service companies recorded a modest and slowest increase in new orders in three months. In the meantime, service companies recorded a further decline in backlogs, with a marginal increase in employment.
The EUR/USD exchange rate was not very impressive. The rate is still below 1,1700, the lowest since late July. The recent strengthening of the USD also seems to have an impact on investor behavior in the currency options market. According to data presented by Bloomberg, investors are building positions assuming a strengthening of the USD. The recent risk aversion has led investors to bet more on USD appreciation than the EUR within a month. This is the first time since June 23rd. The US elections may also have an impact on the position of investors, as the demand for instruments that may gain when the dollar appreciates has also started to prevail within 2 months from now.
Today, many PMI publications are ahead of us, including data from the USA, which will be published at 15:45. These reports may influence the behavior of stock indices and the US dollar.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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