Fundamental Comment

Economic Week: PMIs; calmness to dominate markets

PMIs and calmness to dominate markets

Financial market watchers will witness the release of the final Purchasing Managers’ Index from a number of major economies, which are likely to give some clues about the growth pace in the last quarter of the year.

It is necessary to note that the manufacturing and service PMI released by the Chinese economy are expected to be of great importance, as the market awaits the trade agreement between the United States and China.

However, it is expected to witness continued low-volume trading and calmness with the absence of investors due to the New Year's holidays.

US Dollar

The manufacturing and Service PMI reports for December will be of interest to investors as it may give an impression of the fourth-quarter growth in the US economy.

The final composite PMI, which includes the manufacturing and services sectors, may confirm an improvement in the pace of growth to 52.2 in December from 52.0 in November.

Last but not least, any developments regarding the trade agreement between the United States and China may affect the dollar in particular and the markets in general.

Pound Sterling

This week, the UK will release the PMI reports for the manufacturing and construction sectors, while the services sector data will be released next week.

Expectations indicate a widening contraction in the manufacturing sector to 47.4 in December, compared to 48.9 recorded in November, while the construction sector index may improve to record 45.6 in December after a reading of 45.3 in November.

Euro

The euro is likely to be affected by some important data that will be released from the euro area, as investors will focus on the final manufacturing PMI in the euro area, which may confirm a widening contraction of 45.9 in December from 46.9 in November.

Other than the PMI report, the euro may move in line with the general direction in the market in light of the continued holidays in many major economies.

Commodities

Gold hit its highest level since early November last week, after rising hopes that the United States and China could reach a preliminary trade agreement led to the dollar’s ??decline.

The yellow metal this week will largely depend on the important economic data issued by the major economies, as in the case of increasing concern about the slowdown in global growth, this may give some support to the yellow metal, but it is necessary for the price to stay above the level of $1500 an ounce.

With regard to crude oil, prices managed to achieve significant increases in the past week as a result of optimism that the United States and China are close to reaching an agreement, and with OPEC and its allies continuing to put restrictions on their oil production.

This week, oil prices are expected to be affected by the latest trade developments and data related to global economic growth, in addition to the weekly US oil inventories report.

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