The final EMU manufacturing PMI was slightly stronger than expected but overall the data released in Europe today are somewhat on the low side as the bar has been set high. European currencies are losing ground as a consequence with the British pound now the weakest G10 currency. 

While the EMU PMI was a notch better than assumed (at 57.4 vs 57.3 pts.) it was mainly a result of another stellar reading from Germany where the index inched up to 59.6 pts., beating expectations again (59.3 pts.). Elsewhere the numbers missed the market consensus with Spain deviating nearly a point from (54.7 vs 55.6 pts. expected). Make no mistake – these are still great numbers underscoring a broad economic recovery in Europe but over the course of the past few months expectations rose significantly, along with the EURUSD. With euro positioning now close to decade’s highs it will take more to drive the pair towards 1.15 and during a week dominated by US events (especially the NFP on Friday) a corrections cannot be ruled out. 

European PMIs point at a continued recovery but it’s harder to surprise investors as expectations increase. Source: Macrobond, XTB Research 

In UK a miss was much bigger at just 54.3 pts., down 2 points from May with the consensus looking for a broadly unchanged number. While this is still a decent number, in any case reflecting robust manufacturing growth, it is nevertheless a blow to the GBP that saw a rally in the final week of June fueled  by hawkish remarks from the Bank of England. Keep an eye on the services PMI that disappointed in May – another weak reading could undermine GBPUSD currency rate. The report has been scheduled for Wednesday. 

The PMI manufacturing index disappointed in UK, a similar index for the services sector could be crucial for GBP later this week. Source: Macrobond, XTB Research 

We still wait for similar reports from the US: PMI at 2.45pm and more important ISM at 3pm BST.