Image source: Zhao Jiankang © 123RF.com
The welcoming news from the German economy is undoubtedly the manufacturing PMI data that was released earlier today by Markit.
In the economic report, it was observed that the index had exceeded the February consensus forecasts by reaching 47.8 points. The prevailing market expectations were instead projecting a likely tumble from the recorded 45.3 points in January to 44.8.
The manufacturing sector encompasses a substantial part of the overall German industry, which is why it is such an important gauge for the well-being of the German economy as a whole.
Germany Manufacturing PMI. Image source: TradingEconomics.com
The manufacturing PMI index is currently on its highest level in over a year, which is encouraging news to local investors who were spooked last week when it was announced that Germany is on the brink of entering into a structural recession.
Nevertheless, it should also be mentioned that despite the evident rally, the prevailing situation in German manufacturing may not be as favourable as it may seem at first glance.
Most of February’s gains can be attributed to the impact of the coronavirus in China and elsewhere, which has distorted the global supply networks. As it is argued in trading economics :
“Almost half of the index’s gain in February was attributable to a deterioration in supplier delivery times, linked to coronavirus-related disruption in China. Also, new orders, employment and stocks of purchases showed slower rates of decline.”
The economic news in Germany, disregarding the marginal slump in the services PMI, is mostly positive. Due to the uncertainty connected to the spread of COVID-19, however, the euro was not bolstered substantially upon the release of the fundamentals.
The more decidedly optimistic PMI data in the UK has prompted the EURGBP pair to remain trading in a tight consolidation range between the major resistance level at 0.83973 and the major support level at 0.83000. The latter has psychological importance due to the three zeroes at the end of the number.
The stochastic RSI continues to thread lower, which is illustrating the rising bearish momentum in the short-term.
EURGBP 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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