The Eurozone services sector seems to be holding firm in the face of the delta variant of COVID-19. According to HIS Markit data, this all puts the Composite PMI at 60.6 which is a 252 month high (21 year high). 

The flash Services PMI for July increased to 60.4 (from 58.3 in June) which also beat consensus expectations that were looking for an improvement to 59.5.

The positive impact of the data will have been tempered slightly by the decline in the Manufacturing PMI to 62.6 (from 63.4) however this did still marginally beat expectations of 62.5.

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As can be seen, there are positive correlations between the PMIs and GDP (economic growth), so the data is seen as an important forward-looking indicator.

This data is encouraging for the Eurozone, however, given the re-confirmation of the very dovish stance from the ECB yesterday, this good news is likely to be quickly passed over. Furthermore, watching the spread of the delta variant case numbers and how Eurozone countries respond in the coming weeks will be crucial as to whether this data is peaking. 


Initial Market Reaction

There has been some initial sign of support for EUR today as the dust has settled from the very dovish ECB. On EUR/USD some of this has been via a less strong USD. 

Despite this though, the Eurozone flash PMI should help to generate some support for the euro. There has been little reaction elsewhere though.

  • EUR/USD +10pips
  • 10 year Bund yield flat
  • DAX flat