EUR: Manufacturing concerns deepen Eurozone PMIs continued to paint a grim picture for the region’s manufacturing outlook. In Germany, Manufacturing PMIs continued to grind lower despite expectations of a rebound. It now appears clear that the mild optimism around the turn of the year was likely misplaced. That is not hugely relevant for the FX market, anyway. The soft economic outlook in the eurozone has been priced in for a while, and with markets relatively confident about a June European Central Bank cut (23bp priced in), it’s mostly dollar rate expectations that are set to keep moving EUR/USD. It remains unlikely that the pair can enjoy a sustained recovery without a decline in USD rates, but we discussed above how yesterday’s positive dollar reaction to US data appeared overdone considering the recent narrative by the Fed, and we don’t feel EUR/USD should fall much further before bottoming out.