Global PMIs should be Noteworthy
Joe Perry March 23, 2020 7:34 PM
This will be the most significant data for March that we have seen so far.
Tomorrow, preliminary Purchasing Managers’ Indexes (PMIs) will be released globally. This will be the world’s first significant economic data since the coronavirus has gone global. According to Investopedia, the PMI is an index of the prevailing direction of economic trends in the manufacturing and service sectors. A reading of above 50 represents an expansion and a PMI reading of under 50 indicates contraction.
Over the past month, the coronavirus has wreaked havoc on many global economies, resulting in factory shutdowns, store closures, and laid off workers. The flash PMIs will give us a look at how bad the economy has been since early March, when February’s numbers were finalized. Many countries were teetering around the 50 level before the pandemic. Now, many have likely fallen into contraction territory. Below are some of the more important expectations for tomorrow’s PMIs:
Country Manufacturing Last Services Last
Australia 50 50.2 48.3 49
Japan 43.7 47.8 41.8 46.8
Germany 40 48 42.5 52.5
EU 39 49.2 38.4 52.6
UK 45 51.7 45 53.2
US 42 49.4 43 50.7
*There is also a Composite number for the manufacturing and services together, however traders tend to pay closer attention to the manufacturing and services numbers separately.
What will the economic data mean for the markets? Any numbers that are better than expected would be a surprise. However, traders are likely to ignore any better numbers and look ahead to the final data due on April 1st, expecting them to be revised lower. If the data is worse than expected, markets are likely to sell off.
Given that the data are released at different times throughout the day, we could see some extreme volatility. For example, if Australia’s data is weaker than expected, AUD/USD may head lower. However, later in the day if the US data is worse than expected, we may see AUD/USD go bid. The level of volatility will depend on which country’s data is closer to consensus.
Obviously, this information must be taken in context of what else is happening during the day. However, this will be the most significant data for March that we have seen so far. Traders will be watching!
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.