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23/04 EUR PMI: What to Expect

Look out traders! On Friday the 23rd of April, European countries will be printing their PMI data and here's what to expect...

The Purchasing Managers' Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index, which essentially summarises market conditions viewed by purchasing managers if they are expanding, staying the same or contracting. The PMI aims to provide information about current and future business conditions to company decision-makers, analysts, and investors.

PMI data is released by the Institute for Supply Management (ISM) and is based on a monthly survey sent to senior executives at more than 400 companies in 19 primary industries, which are then weighted by their contribution to the US GDP. The PMI is based on five major survey areas: new orders, inventory levels, production, supplier deliveries, and employment. The ISM weighs each of these survey areas equally. The surveys include questions about business conditions and any changes, whether improving, no changes, or deteriorating.

The headline PMI is a number from 0 to 100. A PMI above 50 represents an expansion when compared with the previous month. A reading below 50 represents a contraction, and a reading at 50 indicates no change compared to the previous month. The further away from 50, the greater the level of change.

French PMI

  • Services PMI to contract from 48.2 to 46.6
  • Manufacturing PMI to contract from 59.3 to 59.0

Services PMI is predicted to come out worse than the previous month, and below 50.0 which represents a contraction. Manufacturing on the other hand is predicted to come out still as an expansion but worse by 0.3 compared to the previous month.

German PMI

  • Services PMI to contract from 51.5 to 51.1
  • Manufacturing PMI to contract from 66.6 to 65.8

Services PMI is predicted to come out worse than the previous month, but still above 50.0 which represents an expansion. Manufacturing on the other hand is predicted to come out still as an expansion but worse by 0.8 compared to the previous month, but is way above 50.0 which is good for the currency.

What Does This Mean for EUR Pairs:

If we see the data come out as the forecast, we could see some mixed movements in the market. The data isn't all suggesting strong or weak, as some are hinting at strength but some are also hinting at weakness.

One thing for sure though, currently in the chart above, we have got a descending channel formed from a bullish flag pattern. Depending on the data set to come out, we could either see price break out this channel and look to complete the long-term chart pattern. We could see this data hint at weakness, and price could continue the channel and head towards the downside again.

Look out for the actual data, and use the explanations above to guide you where price could be heading next. Stay safe traders!

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