The Euro rallied sharply against the Pound on Wednesday due to a string of data releases which showed that the single currency region’s economic recovery is still on track.
Prior to the release of GDP data a report showed that the Eurozone’s dominant services sector saw activity increase at its fastest pace in three-years.
The rise in the sector raised optimism that the region is slowly but surely improving.
Markit’s services PMI increased from April’s figure of 53.1 to 53.2. A strong services sector suggests that domestic demand is improving.
Another report showed that the regions private sector is on course to make its best quarter in three years despite being slowed by a weak French economy.
Markit’s Eurozone PMI Composite Output Index came in at 53.5 for May, slightly lower than April’s near-three year high of 54.0.
That shows that manufacturing and service sector firms across the region continued to expand last month.
According to the EU’s Statistics Office the Eurozone saw its economy expand by just 0.2% in the first quarter of the year. The rise was widely expected by economists.
Growth in the first quarter rise was mainly due to Germany, which compensated the stagnation in France and the shrinking output being seen in Italy, the Netherlands, Portugal and Finland.
Further gains for the Euro were restrained as the GDP data was seen as reinforcing expectations for the European Central Bank to take bold action at tomorrow’s policy meeting.
A number of economists are forecasting that the ECB could become the first Central Bank to take interest rates into negative territory by cutting its deposit rate.
Further gains against the Pound were restrained after a report showed that the UK’s service sector grew in May and that hiring in the sector reached a 17-year high.
The Markit’s services PMI edged down to 58.6 in May from 58.7 in April, which was its strongest reading in 2014 so far.
Euro to GBP & USD Update – 05/06/14
The Euro is holding ground ahead of what promises to be a volatile afternoon for the currency.
Investors are widely holding their positions ahead of the day’s eagerly anticipated European Central Bank policy meeting.
The currency found some support against the US Dollar early in the session after a report showed that monthly factory orders rebounded strongly in Germany in April.
A slight fall in French unemployment also offered support as it reduced some of the concern over the state of the regions second largest economy.
The Pound managed to firm against the single currency however after data showed that UK house prices surged to a six-year high last month as rising demand pushed values higher by 3.9%.
Eurozone retail sales data is likely to have little effect on the single currency as all eyes will be fixed on the ECB. Depending on what measures the Central Bank introduces we can expect the Euro to fall against its most traded peers.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3615 ,
Euro,, Pound Sterling,0.8141 ,
Euro,,Australian Dollar,1.4693 ,
Euro,,Canadian Dollar,1.4887 ,
Pound Sterling,,Euro,1.2287 ,
US Dollar,,Euro,0.7345 ,
[/table]
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