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Forex Flash: Eurozone analysis yields German PMI precursor – UBS

FXstreet.com (Barcelona) - Germany's economy is central to the euro, producing one third of Eurozone GDP. According to Mansoor Mohi-uddin, head of Foreign Exchange Strategy at UBS, “Investors follow IFO and purchasing managers' surveys in assessing Germany's business cycle, however neighboring countries' PMI data may give earlier signals for Germany's outlook. This is because Germany is Europe's largest export market.”

Of Germany's nearest trading partners, we find Polish PMI has anticipated turning points in Germany's economy over the last few years. In contrast most other countries' PMIs seem coincident and only released after Germany's. Interestingly, though, we also find Swedish PMI has recently been a lagging indicator of Germany.

This week's data shows Polish PMI fell from 48.9 in February to 48.0 in
March. That suggests German PMI data may also fall more in the next few months, to the detriment of the euro and, given Swedish PMI appears to be following Germany's with a lag, to the krona too.

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