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April is the cruellest month, full of false hope – and so it is for the ECB and Mario Draghi: they look in vain for signs of a recovery in the European economy.

What’s clear from today’s PMI numbers is that there are as yet no green shoots of spring for the Eurozone. Manufacturing remains on the floor, offset to a degree by a healthier services sector which is now also showing signs of malady.

Services remains in expansion, with the Flash PMI at 52.5. However, this was a three-month low and signals that even here there is pressure. Suggestions that the wider slowdown is starting to ‘engulf’ the service sector is a big worry.

French manufacturing hits 13 month low

Manufacturing rose to a two-month high at 47.8, but remains deep in contraction territory. French manufacturing PMI was at a 13-month low. Manufacturing output fell for a third straight month.

“Overall, we see a further slowdown in Eurozone growth,” says Neil Wilson, Chief Market Analyst at Markets.com. “France is stagnating and growth across the bloc is at its slowest since 2013. These are not good times for the European economy, reflected by one of the gloomiest business expectations numbers in five years.”

All it does is raise the prospect of further easing from the ECB in due course. Traders of the EUR will wait to see what the June meeting results in, but with policymakers keeping all options open, further deterioration in the macro data would likely necessitate a return to QE before the end of 2019. The ECB is in a jam for sure.

The euro has run into yet more horrid PMI numbers – EURUSD slipped beneath the Apr 11th low at 1.1250, where it has found support for now, but may well bring the prior April lows at 1.1230 into view, which sits near enough on the 61.8% retracement of the rally from below 1.12 since the start of April.

“Whilst some optimists may have been hoping for signs of green shoots from the Eurozone economy, these numbers do not tell us anything especially new,” Wilson added. “The Eurozone economy needs support and more stimulus.”

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Stuart Fieldhouse

Stuart Fieldhouse has spent over 20 years in journalism and financial communications, including six years as a wealth management correspondent for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong.

Stuart has worked as head of content at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Stuart continues to work with hedge funds, private banks, stock exchanges and other financial institutions on their communications, data and marketing requirements.

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