Change in the level of business activity

Financial and commodity markets analytics

Market Watch review. 23.09.2020

In today's release, we’ll cover the following topics:

  • PMIs for the Eurozone.
  • Slowdown in PMI in Britain.
  • US Oil Stock Change Report.

Today all of Europe received preliminary data on changes in the level of business activity in September. The statistics turned out to be very mixed, for example, Germany demonstrates a rapid increase in the PMI for the manufacturing sector, thereby contributing to a moderate increase in the overall index for the eurozone. At the same time, business activity in the service sector of France, Germany and in the currency block as a whole is declining - the index is below 50 points.

Let me remind you that in Europe the service sector accounts for more than 70% of GDP. Therefore, a decline in business activity in this sector of the economy will inevitably lead to a decrease in GDP. Nevertheless, the activity of EUR sellers remains moderate. And in the first hours after the publication of the report, the EUR / USD currency pair held above the session lows, thereby indicating that this data did not become news for traders and investors.

Also, Britain has published PMI indices for the services and manufacturing sectors. Compared to European data, the situation in Britain is much better, but in Britain the level of business activity in the service sector is declining, thereby indicating an unsustainable recovery. Therefore, even a slight tightening of quarantine measures can be catastrophic for the whole of Europe and, accordingly, for European currencies.

Moving to the American trading session, I will also note the forthcoming publication of the PMI, but a much more important event will be the speech of the US Federal Reserve Governor Jerome Powell. Any hint of the Fed's willingness to provide the necessary stimulus to the US economy will help the stock market recover and, as a result, weaken the USD.

No less important event for traders will be the publication of data on changes in US oil reserves. Only a significant decrease in them can support oil quotes. But it is also necessary to consider the sentiment in the US stock market. After all, further sales could put very strong pressure on oil, dropping WTI quotes below $38 per barrel.

Closely monitor the news background and be prepared for all the surprises of the market.
 


Analyst

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