HSBC: Cyclical Implication Of PMIs Is Clearly Negative

In light of today’s PMI prints HSBC note that “for EUR, the cyclical implications of these prints are clearly negative.”

• “Our constructive stance on EUR has been partly based on positive consumer and business momentum, which we expected to persist through the summer as inflation adjusted incomes started to rise and the services sector remained resilient.”
• “The latter has clearly been a big disappointment, while recent rises in energy prices threaten the recovery of real earnings. Some structural forces (strong current account) are still supportive but these are unlikely to be the focus for near-term momentum.”
• “The ECB may be caught in something of a bind going into its September meeting. Very sticky core inflation and wage pressures appear to call for more tightening, but much weaker activity data suggests the opposite.”
• “ECB market pricing has rowed back, but the further this declines, the more near-term downward pressure is likely for the currency.”