The Euro began the week feeling the pressure as investors speculated on the likelihood of the European Central Bank introducing additional easing when it meets on Thursday.
However, the common currency went on to advance on peers like the Pound as measures of manufacturing for the Eurozone and its largest economies advanced by more-than-forecast.
Although French manufacturing PMI came in below the 50 mark separating growth from contraction in February, it rose from 48.5 to 49.7.
Similarly, the German manufacturing sector expanded by slightly-more than expected, with the gauge reading 54.8 instead of 54.7.
The Eurozone manufacturing PMI produced a figure of 53.2, up from the 53.0 previously estimated but down from January’s 32-month high.
The result confirmed that the recovery in the Eurozone’s manufacturing sector persisted in February as the level of output and new orders rose.
Germany and Austria were the Eurozone’s most strongly performing nations, and Italy’s recovery continued (albeit at a slower pace).
French manufacturing PMI achieved a five-month high, signalling that the sector may soon return to growth.
The report elicited this response from Markit economist Chris Williamson; ‘The dip in the manufacturing PMI, its first fall for five months, is a disappointment and a reminder of the hesitant nature of the region’s nascent recovery. However, we should not lose sight of the fact that this is the second-strongest trading that the Eurozone has seen for almost three years. […] With new orders and backlogs of work still rising at reasonable rates, further ongoing expansion is signalled for coming months. Employment has now also risen for two consecutive months […] Policymakers will nonetheless be reassured that the trends in manufacturing output and employment are moving in the right direction.’
However, in spite of these encouraging reports Euro gains against the Pound were limited as Sterling was supported by the news that the UK’s manufacturing sector expanded at a slightly-faster-than-forecast pace last month.
While some investors are betting that the ECB will cut rates beyond current record lows when it meets later this week, others are arguing that the need to do so has lifted recently.
In the opinion of one London-based economist; ‘The pressure felt a month ago that might have led the ECB to be very aggressive this week has somewhat diminished. Business-cycle information is supporting the story of a modest recovery and inflation is broadly tracking the ECB’s December forecast.’
The Euro continues to trade lower against a boosted US Dollar. Both the ‘Greenback’ and the Yen are in high demand because of Russian President Vladimir Putin threatening to invade the Ukraine.
Before Thursday Euro movement may be inspired by the Eurozone’s producer price index and services PMI/growth data for the 18 nation currency bloc.
Further GBP/EUR movement could also be triggered by the UK’s construction and services figures. If they surprise to the upside like today’s manufacturing report the Pound could advance on its European cousin.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8235,
Euro,,US Dollar,1.3777,
Euro,,Canadian Dollar,1.5264,
Euro,,Australian Dollar,1.5421,
Euro,,New Zealand Dollar,1.6466 ,
US Dollar,,Euro ,0.7257,
Pound Sterling,,Euro,1.2143,
Canadian Dollar,,Euro,0.6550,
Australian Dollar,,Euro,0.6472,
New Zealand Dollar,,Euro,0.6082 ,
[/table]
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