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Euro area’s flash purchasing managers’ indices fall again in May

Euro area’s flash purchasing managers’ indices dropped again in May, more sharply than expected. The manufacturing PMI dropped for the fifth straight month to 55.5 from 56.2 in the prior month, as compared with the consensus expectations of 56. This is the lowest since February 2017. Meanwhile, the services sector PMI fell 0.8 points to 53.9, as compared with consensus expectations of 54.5 ad is over 4 points below its high recorded in January 2018.

According to a Commerzbank research report, today’s data implies that the softer economic growth in the March quarter was not an outlier. Because of the solid appreciation of the euro, the 2018 growth projection has been considerably lower to 2.1 percent, said Commerzbank.

However, the European Central bank has greatly ignored the gloomier economic data so far. The central bank was not surprised by the subdued growth of the currency bloc in the March quarter. It continues to assume that the economy will record solid growth in the further course of the year. But following today’s data the ECB might slowly begin to be concern about the economy, stated Commerzbank. It might thus not make a decision on the bond purchasing program after September at its next Governing Council meeting.

“We still expect the ECB to discontinue the programme in December, but the first interest rate hike will be a long time coming. We expect the ECB to increase the deposit rate slightly from -0.4 percent to -0.3 percent in September 2019 at the earliest”, added Commerzbank.

At 15:00 GMT the FxWirePro's Hourly Strength Index of Euro was slightly bearish at -65.1464, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 25.3422. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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