The new trading week, the first this month, began with the release of important macro statistics from the Eurozone, which indicated that the region's economy is actively recovering from lockdowns.
Thus, the purchasing managers' indices (PMI) for the manufacturing sector of the key economies of the Eurozone, published at the beginning of today's European session, became another indicator of the development of economic momentum in Italy, France and Germany.
Italy's manufacturing sector grew at the fastest pace in history in April, according to IHS Markit. The purchasing managers' index (PMI) for the manufacturing sector (from IHS Markit) of the country in April rose to 60.7 from 59.8. This was the highest monthly reading since June 1997, when such measurements were first taken.
A similar index for France, although it fell to 58.9 in April from 59.3 in March, indicated close to the maximum growth in activity in 23 years, in which such data is analyzed, IHS Markit said.
The manufacturing sector in Germany also continued to demonstrate historically high activity growth rates in April. Thus, the purchasing managers' index (PMI) for the manufacturing sector in Germany amounted to 66.2 in April against a record 66.6 in March. This is the second largest indicator since the start of such statistics in 1996.
As a whole for the Eurozone, the manufacturing PMI in April rose to 62.9 from 62.5 in March.
"The rate of growth in production and new orders in the last two months has been higher than at any time since the start of such statistics in 1997, as the return of economies to their usual rhythm after lockdowns and improved prospects for the coming year spurred demand," - IHS Markit said. Production and new orders increased on the back of stronger demand and improved market sentiment.
Although there are still problems and supply chain disruptions associated with the pandemic, in general, the manufacturing sector of the Eurozone economy, the main driver of the entire European economy, shows signs of a strong recovery and a propensity for further growth in performance. And this is a strong positive factor for the euro.
The EUR / USD pair responded with active growth after the publication of positive macro statistics from the Eurozone and rose 2.6% to the closing price last Friday. At the time of this article's publication, it is traded near the 1.2052 mark, in close proximity to the strong resistance levels 1.2061, 1.2065 (see Technical Analysis and Trading Recommendations).
In general, since the beginning of last month, there has been an increase in the positive dynamics of EUR / USD, and in case of a breakdown of the indicated resistance levels, the pair is likely to continue growing towards the recent highs near the mark of 1.2150.
Today, volatility in the market and in the EUR / USD pair, in particular, may increase again at 13:45 and 14:00 (GMT), when the US PMI for the manufacturing sector for April from Markit and ISM. They are also expected with an increase in indicators (60.6 and 65.0, respectively), indicating the development of economic momentum. This is also a strong positive for the USD. The only question is how much it has already been taken into account in its quotes, and how strongly the dollar will react with strengthening to the growth of PMI indices.
Market participants will also pay attention today to the speech of the head of the Fed, Jerome Powell. It is scheduled to start at 18:20 (GMT). Probably, his speech will not contain anything new about what he said earlier about the prospects for the Fed's monetary policy. Nevertheless, unexpected statements from Powell's part are also not excluded, which can sharply increase the volatility in the market during the period of his speech.
Meanwhile, despite the rising yields on US government bonds, the DXY dollar index declines at the beginning of today's European session. As of this writing, DXY futures are traded near 91.10 mark, 18 pips below Friday's close.
*) The yield on 10-year US government bonds ended last week at 1.626%, with relatively strong weekly gains. At the time of publication of this article, it is 1.647%.