All eyes have been on the European Central Bank since it started to reduce interest rates last year which led to its main interest rate at 0.05%, its marginal lending facility rate at 0.20% and its deposit facility rate of -0.20%. The negative deposit facility rate was previously tested by the Danish central bank without success, but the ECB tried to discourage deposits by all means necessary and therefore charges banks for accepting deposits.
After the announcement of a quantitative easing program through the means of sovereign bond purchases in the Eurozone each month through late next year more and more forex traders have ignored the positive economic news out of the Eurozone. The Euro has sold-off sharply, but over the past few trading weeks showed resilience to decline further. The primary reason for this has been positive economic reports out of the Eurozone.
Forex traders will receive a very important piece of economic data today as the Eurozone will report its Composite PMI, its Manufacturing PMI as well as its Services PMI. Prior to the overall Eurozone PMI, heavyweights France and Germany will report their respective PMI’s which will give a preview of what can be expected from the main report. Today’s report will move the Euro and forex traders should be prepared for this as tight stop losses are likely to be triggered.
France is expected to continue its recovery as the French Composite PMI is set to increase to 51.8 in April from the 51.5 reported in March, the French Manufacturing PMI is expected to increase to 49.2 in April from the 48.8 reported in March and the French Services PMI is expected to remain unchanged at 52.4. Germany is also expected to continue its recovery as the German Composite PMI is set to increase to 55.6 in April from the 55.4 reported in March, the German Manufacturing PMI is expected to increase to 53.0 in April from the 52.8 reported in March and the German Services PMI is expected to increase to 55.5 in April from the 55.4 reported in March.
This will set the stage for the Eurozone PMI which is likely to move the Euro sharply. Economists expect the Eurozone Composite PMI to increase to 54.4 in April from the 54.0 reported in March. The Eurozone Manufacturing PMI is expected to increase to 52.6 in April from the 52.2 reported in March and the Eurozone Services PMI is expected to increase to 54.5 in April from the 54.2 reported in March. Any surprise out of France and Germany could influence the overall Eurozone PMI.