The data on the eurozone is beginning to show what many economists and experts were so afraid of. Even taking into account reports on industrial activity, which failed to recover at the beginning of this year, the impact of the coronavirus on the economy will be much stronger than expected. Most likely, the weak economy of the euro region will be in a much more difficult position than the US, China or Japan.
Only a report on retail sales in Germany in February this year reminded us of the good times that would have awaited the economy if there had not been a coronavirus pandemic. According to data, retail sales in Germany rose sharply in February due to a fairly high domestic demand for essential goods. Compared to February last year, sales jumped by 6.4%. Compared to January, sales jumped by 1.2% in February, with a forecast of 0.1%. The largest increase was observed in the online sales of food products. The jump was also recorded in sales of pharmaceutical products by 6.6%, as many began to fear the spread of the epidemic even then.
As for the reports on the manufacturing sector of the eurozone, there is nothing good in them that could stop the fall of the European currency. In Italy, the purchasing managers’ index (PMI) for the manufacturing sector in March fell immediately to 40.3 points against 48.7 points in February, with a forecast of 40.5 points. The same indicator in France fell to 43.2 points in March against 49.8 points in February and the forecast at 42.8 points.
Germany experienced a decline more steadily. Markit noted that the purchasing managers’ index (PMI) for the manufacturing sector in March fell only to 45.4 points against the February value of 48.0 points. The data coincided with the forecasts of economists.
In general, the eurozone recorded the lowest value in the last 92 months. So, according to IHS Markit, the purchasing managers’ index for the manufacturing sector of the eurozone in March 2020 fell to 44.5 points from 49.2 points in February, while the preliminary manufacturing PMI of the eurozone in March was equal to 44.8 points. However, the agency noted that even such a large decline in the index does not fully reflect the severity of the weakening of activity.
The February decline in the unemployment rate in the eurozone remained unnoticed for the market, as it no longer had any significance for future forecasts. According to the data, the unemployment rate in the eurozone in February fell to 7.3% from 7.4% in January, with a forecast of 7.4%.
As a result, the euro returned to the lows of yesterday in pair with the US dollar, which keeps the probability of further reduction of the trading instrument to larger lows.
As for the technical picture of EURUSD, the bears will seek a test of the support levels of 1.0850 and 1.0770, where you can again watch the active actions of large buyers of risky assets. Weak statistics on the US economy can only confirm the fears of traders, which will force them to increase their long positions on the US dollar.
The British pound ignored the indicator of the activity of the manufacturing sector. According to a report from IHS Markit and CIPS, the month of March for manufacturing activity was more difficult than initially expected. Thus, the purchasing managers’ index (PMI) for the manufacturing sector fell to 47.8 points against 51.7 points in February. Let me remind you that an index value below 50 indicates a decrease in the activity. Economists had expected a much larger drop to 46.5 points.
As for the technical picture of the GBPUSD pair, the entire struggle continues in the side channel, going beyond which will determine the further direction of the trading instrument. A break of 1.2300 will increase pressure on the pair and open the way for bears to the area of 1.2140 and 1.1980. A break in the resistance of 1.2490 by the bulls will trigger new purchases to the highs of 1.2600 and 1.2720.