• German Manufacturing PMI arrives at 54.7 in May vs. 54.0 expected.
• Services PMI in Germany drops sharply to 56.3 in May vs. 57.2 expected.
• EUR/USD is trading near highs around 1.0730 on mixed German PMIs.

The German manufacturing sector quickened its pace of expansion but the services sector activity slowed down in May, the preliminary manufacturing activity report from S&P Global/BME research showed this Tuesday.

The Manufacturing PMI in Eurozone’s economic powerhouse came in at 54.7 this month vs. 54.0 expected and 54.6 prior. The index rebounded to two-month highs.

Meanwhile, Services PMI dropped from 57.6 booked previously to 56.3 in May as against the 57.2 estimated. The PMI clocked the lowest level in two months.

The S&P Global/BME Preliminary Germany Composite Output Index arrived at 54.6 in May vs. 54.0 expected and April’s 54.3. The gauge reached two-month peaks.

Key comments from Phil Smith, Economics Associate Director at S&P Global

“A post-lockdown recovery in services activity continues to provide a strong tailwind for the German economy, with May’s ‘flash’ PMI data signalling that output levels remain in growth territory.”

“Even manufacturing saw a slightly better performance in terms of production levels in May. However, goods producers are increasingly turning to backlogs of work to support output as new orders show a sustained decline, boding ill for growth prospects in the sector if demand for goods continues to falter.”

FX implications

EUR/USD is holding the higher ground near 1.0730, adding 0.35% on the day. The spot caught a fresh bid wave on the hawkish comments from the ECB Chief Christine Lagarde.