PMI Composite Output and the Manufacturing Output indices fell in Germany much more than the market expected. Supply chain disruptions are real and affect the largest economy in the Euro area. The common currency did not react to the news.
Today is the last trading day of the week, and in Germany, the PMI data was released. The PMI Composite Output and the Manufacturing Output indices came out at an 8-month, respectively 16-month low.
Even the Manufacturing PMI fell to a 9-month low, although it remains well into expansionary territory. Thus, when interpreting the PMI data, traders must consider the 50 level as the line in the sand or the level that makes the difference between economic expansion or contraction.
As such, the manufacturing sector keeps expanding, as suggested by the PMI, coming out at 58, but it fell at a 9-month low nevertheless. In other words, caution is needed.
Supply chain disruptions are cited for the weakening data. Also, the decline in demand from the automotive sector weighed too.
How Did the Euro React?
The common currency did not react much to the data. The EUR/USD traded with a bullish tone all week, albeit the daily ranges were small. Nevertheless, traders keep buying the euro pairs, as seen in the EUR/USD ability to hold above 1.16 and EUR/GBP ability to hold above 0.84.
The chances are that we will see more of the same on the euro pairs until next week’s European Central Bank meeting. Traders expect the ECB to tweak the asset purchases program and to provide more details at next week’s meeting.