The Euro began the local session close to a ten-week low against the Yen and softer against the Pound and US Dollar as investors debated the odds of central bank intervention.
Although a slightly disappointing non-manufacturing report for the UK later put pressure on the Pound, the Euro still fluctuated against its British counterpart as a result of several below-estimate data releases for the Eurozone.
Although Italian and French services PMI showed a slower pace of contraction than forecast, the gauges of services output for Germany and Eurozone fell short of previous estimates.
Instead of achieving the 53.6 level expected, German services PMI came in at 53.1 while Eurozone services PMI reached 51.6 rather than 51.9.
Eurozone composite PMI indicated that the currency bloc’s economy enjoyed the fastest rate of expansion since mid-2011 in January, although that figure had also declined from earlier estimates.
The manufacturing sector was largely responsible for the upturn.
In a statement published with the figures Markit economist Chris Williamson observed; ‘The final reading of the Eurozone PMI was down slightly on the earlier flash reading but nevertheless signals a very encouraging start to the year. […] We should expect GDP forecasts for 2014 to start being revised up if the PMI continues to rise’.
However, Williamson did add; ‘The main concern is that the recovery is still all-too dependent on the manufacturing sector. Although the service sector has returned to growth, its weak pace of expansion reflects still-subdued domestic demand – especially from consumers – in many Eurozone countries’.
While these results inspired modest movement in the Euro, the common currency faltered slightly after the Eurozone’s retail sales report was published.
Economists had forecast a decline in sales of 0.7 per cent in December, despite the fact that the month traditionally marks an upswing in spending. However, sales actually plummeted by 1.6 per cent month-on-month following a gain of 0.9 per cent in November which was smaller than previously forecast.
On the year sales were down by 1.0 per cent.
Given that this sales slump supports the case for the European Central Bank introducing further stimulus measures when it meets tomorrow the Euro is likely to remain under pressure in the hours ahead.
Tomorrow EUR/GBP movement will also be driven by the Bank of England’s rate decision. The British central bank is expected to leave rates unaltered.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8305,
Euro,,US Dollar,1.3522,
Euro,,Canadian Dollar,1.4949,
Euro,,Australian Dollar,1.5190 ,
Euro,,New Zealand Dollar,1.6464 ,
US Dollar,,Euro ,0.7395,
Pound Sterling,,Euro,1.2046,
Canadian Dollar,,Euro,0.6690 ,
Australian Dollar,,Euro,0.6599,
New Zealand Dollar,,Euro,0.6083 ,
[/table]
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