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BOTTOM LINE: The Eurozone Manufacturing Purchasing Manager Index(PMI), released today, fell to 50.8 in April versus 52.0 in March. This index is at its lowest level since August 2005. Moreover, the Citigroup Eurozone Economic Surprise Index(weighted historical standard deviations of economic data surprises versus the Bloomberg median estimate) has declined from 78.5 on March 26th to a current reading of 19.2. The recent surge in the euro, parabolic rise in commodity prices and the US slowdown are beginning to take their toll on manufacturers in the region. I continue to believe the European Central Bank is falling behind the curve by focusing too much on inflation. I still expect them to change their stance over the coming months, which should boost the US dollar.
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