European Growth sinks Lower, Euro Bleeds

(eToro Blog) The release of April PMI data began early this morning, and the first from China offered some signs of improvement that surely gave rise to hope for a similar pattern in the Euro area’s growth, but it was not in the cards. Nor was an improvement in the Euro area’s employment situation.

The German Statistics Office reported earlier that the unemployment rate had been revised upward to 6.8% in March, and held at 6.8% in April; a recent consensus had been forecasting a rate of 6.7%, essentially flat on the assumption that the March data would have remained unchanged. The unemployment change was also unexpectedly poor, increasing by 19,000 for the month of April against expectations of another decline of 10,000. In line with the worsening labor situation in Germany, the broader Euro area’s unemployment rate also ticked higher from 10.8% to 10.9%, which was generally in line with expectations.

PMI data for Germany and the broader EMU area was also released earlier by Markit Economics, and in both cases the readings were well below forecasts; for Germany, the manufacturing PMI slipped to 46.2 from 48.4, against expectations of a drop to 46.3. For the broader EMU, the reading fell from 47.7 to 45.9, against forecasts of a 46.0 reading. OpenBook guru santoshtiwari – the partner of guru UKTrader – closed a short position in the EUR/USD pair with a 7.75% gain. The EUR/USD is currently trading lower at 1.3178, rebounding from the low of 1.3161 which was struck just after the release of German labor data. OpenBook sentiment on the pair is overwhelmingly bullish at the present time. Over the past month, the 14% allocation in the EUR/USD pair has provided a 5.9% gain for this guru and nearly 2,100 copiers.

In China, HSBC reported that the manufacturing PMI reading improved to 49.3 in April from March’s 49.1, even as economists had predicted a decline in the reading to 48.3. For reference, 50 is representative of the point at which contraction is separated from expansion. That news gave a lift to the Aussie Dollar, which had been under pressure since yesterday when the RBA cut the benchmark rate by 50 basis points. Currently, the AUD/USD pair is trading higher at 1.0336 while OpenBook sentiment is generally bearish. OpenBook trader pote2011 from Australia bettered his record on the pair with a short position that scalped a 1% profit. This trader, who has 5 copiers and 21 followers, has allocated 92.5% of the portfolio to the AUD/USD over the past three months for a 6.2% gain, and has an overall P&L of 107.2% over the same period.

In Switzerland, the Credit Suisse/SVMI Manufacturing PMI data came in at a surprisingly low 46.9 against expectations of a rise to 53.6 from April’s 51.1 reading. OpenBook guru UKTrader has a 4.3% allocation in the USD/CHF pair which has provided him (and his 131 copiers) with a 4.5% return over the last six months. Earlier, well ahead of the PMI announcement, he closed out a long position in the pair with a 3.26% gain. The Swiss National Bank has been steadfast in its conviction to weaken the Swissie in light of the detrimental effects that the too strong currency has had on the Swiss economy but this latest news could give rise to renewed speculation that the SNB may still have to lower its ceiling.

In the aggregate, today’s economic news could change the outcome of tomorrow’s European Central Bank meeting. While it is widely expected that the ECB will hold interest rates at the current 1%, markets will be keen to hear what ECB head Mario Draghi has to say about the possibility of another LTRO in light of this worrying data.

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