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Global April Flash PMIs: Can Recovery Continue?

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There will likely be a lot of focus on tomorrow’s flash April PMI readings from some of the larger economies around the globe. In particular focus will likely be the readings out of Europe, as the market is counting down the weeks until the ECB might cut rates. The sluggish economic situation in Europe is seen as one of the potential deciding factors in whether the Euro will weaken in the coming months or stage a rebound.

Economists have been expressing more positivity about the global economic outlook, which could help support risk appetite. That could have a diverse range of impacts on all currencies around the world. The dollar recently has been gaining not only on interest rates, but also a general move towards safe havens. Gold has also seen gains as well. But the combination of easing geopolitical tensions over the Middle East with the potential of an uptick in economic activity could reverse the safe haven flows in the coming days.

What to Look Out For

First to report will be Australia, which has seen its economy under pressure as the RBA keeps rates high. The data isn’t expected to change that scenario much as composite PMI is forecast to be effectively unchanged at 53.2 from 53.3 prior.

There is a lot of focus on Japan, where the BOJ is struggling to keep the yen from weakening too much until global monetary policy shifts later in the year. Recent comments from Governor Kazuo Ueda suggest that the outlook from authorities is that the economy will slow down by the end of the year, so an uptick in the PMIs might be seen as raising the possibility of a change in policy. Japan’s manufacturing April PMI is expected to improve to 48.5 from 48.2, though it remains in contraction.

Springtime for Europe

After a surprise decline earlier in the year, the French economy is seen returning to growth relatively quickly. If that were to happen, it could put back in place inflationary pressures that might delay the ECB’s rate cut. That will likely be on the mind of traders as they look at both French and German numbers tomorrow. French flash Composite April PMI is expected to jump to 48.6 from 47.7, as both services and manufacturing are seen advancing substantially.

Germany’s surprise return to growth in the services sector is not expected to be replicated in manufacturing anytime soon. But the continued growth could signify that Europe is moving out of stagnation and potentially into more stable growth that could keep the ECB from cutting rates quickly. German Manufacturing PMI is expected to jump to 42.9 from 41.9 prior.

The Anglosphere Stays Ahead

Even as inflation has been coming down precipitously, it looks like the UK might have a sharper downturn and rebound that could end up supporting the pound as the BOE normalizes rates later this year. UK Manufacturing PMI is expected to advance further into expansion to 50.5 from 50.3 prior.

The US economy is expected to remain strong even with the high rates at the Fed. The key point is whether that keeps up inflationary pressures as American consumers feel relatively confident. US composite PMI is expected to be essentially unchanged and expansionary at 52.2 compared to 52.1 prior.

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