Week Ahead for FX, Bonds: U.S., European PMI Data in Focus
As we look ahead to the upcoming week, the focus will be on the PMIs from both the U.S. and Europe, which are critical indicators of business sentiment. A stronger PMI could bolster expectations for future interest rate hikes, particularly in a landscape where inflation concerns remain prevalent. Analysts are keen to interpret these data points in light of ongoing monetary policy strategies by both the Federal Reserve and European Central Bank, as markets await any indications of divergence in their approaches.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The upcoming PMI data will be pivotal in assessing if these projections hold as businesses adapt to changing economic conditions.
How firms align
JPMorgan aligns with an optimistic view, anticipating potential upward movements in response to favorable PMI outcomes, targeting 1.10. In contrast, BofA is more cautious, positioning for a retreat to 1.04 based on weaker signals from business sentiment.
What the data shows
Recent forecasts indicate a steady rise in manufacturing confidence, but any significant downward shift in PMIs could prompt a reevaluation of these targets. For deeper insights, refer to our publication on swings in economic sentiment at /research/sentiment-analysis.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01PMI data is crucial for gauging future interest rate moves by the Fed and ECB.
- 02Watch for any surprises from the data that could shift market expectations.
- 03A strong PMI reading above 50 could target 1.10 or higher for EUR/USD.
- 04Market sentiment remains sensitive to inflationary trends.
Market implications
Traders should closely monitor the PMI releases on the calendar as these will likely catalyze market movements. A successful print could push EUR/USD toward our consensus target of 1.075, while any disappointment might reverse course.
Risks to this view
A weaker-than-expected PMI could alter the landscape, prompting markets to reassess the likelihood of rate hikes and influencing volatility in the EUR/USD pair. This risk factor could lead to a sharp drop toward BofA's 1.04 target.
Sentiment by currency
USD~EUR~JPY~GBP~Composite USD score: +0.00
Sources & References
How we cover this story