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The EUR Gives Up Early Gains Amidst another Data Dump from the Eurozone

It was yet another busy morning on the economic calendar, with Service and Composite PMIs from Spain and Italy in Focus.

Finalized PMIs for France, Germany, and for the Eurozone also provided direction.

The Member States

Spain

In February, Spain’s services PMI increased from 41.7 to 43.1. Economists had forecast an increase to 43.0.

According to the February Survey,

  • Business activity and new orders both continued to see marked declines.
  • Job losses continued to plague the sector and the economy, with workloads remaining depressed.
  • Cost inflation accelerated once more, hitting its highest level since last June.
  • In spite of the doom and gloom, optimism hit its highest level in over two-and-a-half years. Hopes that vaccination programs will bring an end to the pandemic supported optimism.

Italy

Service sector activity also continued to contract. In February, the Services PMI increased from 44.7 to 48.8, coming in ahead of a forecasted 46.0.

According to the February survey,

  • Business activity fell at the slowest pace in 5-months, with the level of new business stabilizing.
  • Looser COVID-19 restrictions had led to higher sales in some sectors, supporting new business.
  • Foreign demand for Italian services continued to decline, however, marking a 20th consecutive monthly contraction. The latest fall in new export orders was the slowest since last February.
  • Firms made further cuts to staffing levels, though the latest decline was the slowest in the current year-long sequence of decline.
  • Cost pressures continued to build, with the rate of cost inflation the most marked since last February.
  • In spite of this, firms continued to reduce their average charges.
  • Looking ahead, optimism was the most upbeat since May-2011, supported by hopes of the further easing of restrictions.

France and Germany

For France, the services PMI fell from 47.3 to 45.6 in February, which was up from a prelim 43.6.

German’s Services PMI fell from 46.7 to 45.7, which was down from a prelim 45.9.

It was a different story for the composite PMIs, however.

An impressive pickup in manufacturing sector activity in Germany led to a rise in the German composite from 50.8 to 51.1. This was down marginally from a prelim 51.3.

For France, the Composite fell from 47.7 to 47.0. This was up from a prelim 45.2, however.

The Eurozone

For the Eurozone, the Services PMI rose from 45.4 to 45.7 in February, which was better than a prelim 44.7.

The Composite PMI rose from 47.8 to 48.8, an upward revision from a prelim 48.1.

According to the February survey,

  • The modest fall in activity was closely linked to a decline in new orders, which fell for a 5th consecutive month.
  • In spite of this, new export business increased at its strongest pace for nearly 3-years.
  • For the Eurozone, there was a net increase in employment for the 1st time in 12-months.
  • Input cost inflation was recorded for the 9th successive month and to the sharpest degree since Nov-2018.
  • As a result, output charges rose for the first time since last February.
  • Optimism hit its highest level in 3-years, supported by the rollout of vaccines and easing of restrictions.

Comp PMI Feb

  • Italy joined Germany as the only nation to record modest growth of output during February. Strong manufacturing performances offset ongoing weakness in service industries for both.
  • Ireland recorded the sharpest contraction, followed by Spain and then France.

Market Impact

Ahead of today’s PMIs, the EUR had hit a current day high $1.21079, after having recovered from a pre-stat low $1.20790.

Through the release of the PMIs, however, the EUR slid to a current day low $1.20742 before finding support.

At the time of writing, the EUR was down by 0.04% to $1.20856

EURUSD 030321 Minute Chart

For the European boerses, today’s stats had a limited impact as the markets continued to respond to falling yields.

At the time of writing, the DAX30 was up by 0.90%, with the CAC40 and EuroStoxx600 up by 0.84% and by 0.69% respectively.

Next Up

ISM Non-Manufacturing PMI and finalized Market services and Composite PMIs from the U.S.

U.S ADP nonfarm employment change figures will also draw interest ahead of the PMIs.