On Friday, the dollar seemed to be king. After weak data from Europe and solid data from the US, it was clearly gaining in value. However, over the weekend, investors reconsidered the situation and adjusted their expectations. This was happening against the backdrop of surprising election results in Romania.
Business Confidence Index from Europe
On Friday, we learned the readings of the business confidence indices in Europe. The PMI index for the eurozone’s industry fell to 45.2 points. This is 0.8 points lower than expected, but it’s not too far removed from recent levels – in September, the index was even lower. The bigger surprise, however, was the index for services. The projected value was 51.6, but the actual reading came in at 49.2. As a result, for the first time since January, we have a score below 50, which separates positive from negative results. Which countries are responsible for this decline? Nearly all, but France and Germany are in the forefront. In France, optimism decreased by 3.5 points in one month. Germany also showed a reduction, but due to its size, its impact is the most significant. The weak data from Europe led to the euro losing a lot of ground against the dollar.
US Data and Dollar Reactions
Following the disappointing opening in Europe, the market turned its attention to the US data, which turned out to be much better. The PMI index for the industry matched expectations and slightly rose to 48.8 points. Meanwhile, the index for services surged to a level not seen in years, at 57 points. The Michigan University Report fared slightly worse, however. Nevertheless, the dollar maintained its steady rise until the end of the day. Over the weekend, investors reconsidered the situation. Since the election of Donald Trump, the US currency has strengthened by almost 5%. This is a huge increase and it is no surprise that there was a correction at the opening of the markets this morning. Such a strong drop over the past few days is apparently seen as excessive.
Election in Romania
Presidential elections were held in Romania over the weekend. As expected, the first round didn’t bring a resolution. However, the results of the current survey leader, who is unlikely to qualify for the next round, took everyone by surprise. The unexpected winner of the first round was a candidate seen as a pro-Russian representative of the far-right. In the next stage, his chances appear slim compared to the other candidates. On the other hand, given the past surprises – nothing can be certain. The exception is that politics have taken a sharp right turn, as two right-wing candidates are expected to meet in the second round. Due to the rigid course of the Romanian Leu against the Euro, the currency markets have yet to react to the elections.
Today’s calendar of macroeconomic data is full of business confidence index readings.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl
Source: https://managerplus.pl/slabe-dane-z-europy-solidne-z-usa-i-wyborcza-niespodzianka-w-rumunii-67477
