Eurozone flash PMIs and the 8am pulse

[Fairman]

Eurozone flash PMIs and the 8am pulse

The flash PMI figures for the eurozone, Germany, and France come out at around 9am Frankfurt time, 8am London, once a month. They're the first look at the economy's health, and they arrive before the hard data.

The market reaction is quick and often sharp. EURUSD can move 20 to 40 pips, and EUR crosses move with it. Spreads widen for a minute or two.

The PMI releases are a good illustration of timing quirks. The German release comes first, then the French, then the eurozone aggregate. Each one is a separate event, with the possibility of three moves in a row, not always in the same direction.

A strong German number with a weak French number can produce a spike up followed by a drop, and the combination sets the tone for the day.

The calendar lists these releases clearly, but they're often overlooked because they're classed as medium impact. Their effect is higher than the label suggests.

Seeing the three reports as a sequence, not as a single event, explains a lot of the chop.

The sequence matters for planning. Germany's number arrives first, and the euro area aggregate lands last. In between, the market is tempted to extrapolate from the German figure. When the aggregate disagrees, the reversal can be sharp.

A useful experiment is to record the three prices at each of the three release moments for several months and then see how often the direction at the first release matched the direction at the third. If it matches only half the time, trading the first print has no edge at all, and waiting for the aggregate simplifies life.

What does EURUSD do in the first ten minutes of a flash PMI on average?