After sliding to a seven-week low against the Pound yesterday the Euro was able to recover losses thanks to some impressive manufacturing and services PMI data for Germany.
The common currency was boosted as measures of German economic performance exceeded estimates.
Manufacturing PMI advanced from 53.7 to 54.2 in April rather than achieving the 53.8 expected, while a measure of services climbed to 55 from 53.
Both gauges moved further away from the 50 mark separating growth from contraction and hit a two-month high – indicating that Germany’s economy is performing strongly.
Meanwhile, the same indices for the Eurozone also surprised to the upside, with manufacturing PMI achieving 53.3 instead of 53.0 and services PMI rallying from 52.2 to 53.1.
The German reports prompted this response from Markit economist Oliver Kolodseike; ‘April’s flash PMI results signalled a continuation of the strong recovery in Germany’s private sector, suggesting that the economy is set to build on the foundation of last quarter’s solid growth. A combination of increased activity, rising new orders and further employment growth across both the manufacturing and service sectors suggest companies will remain in expansion mode during the coming months’.
However, it wasn’t all positive news as Kolodseike did intimate that deflationary pressures remain a real concern in both the Eurozone’s largest economy and the currency bloc as a whole.
According to another Markit economist, Chris Williamson, ‘The Eurozone has started the second quarter on a solid footing. The big concern will be the outlook for prices. There will be growing fears that deflationary pressures are intensifying and that the ECB needs to respond with more than just words to the recent exchange rate.’
Also, measures of manufacturing and services for France came in below forecast levels, with the former dipping from 52.1 in March to 50.9 in April and the latter falling from 51.5 to 50.3.
That being said, the Euro was able to edge up against rivals like the US Dollar, Pound and Australian Dollar in the aftermath of the data publication.
Euro gains against the Pound were slightly limited as minutes from the Bank of England’s latest policy meeting showed that the Monetary Policy Committee believes that the UK economy is strengthening, although they also revealed that the MPC were united in their decision to leave interest rates and asset purchases unaltered.
While the minutes had a minimal impact on Sterling’s exchange rate, the British currency was modestly supported by a separate report showing that the UK’s budget deficit narrowed to its lowest level since the onset of the economic crisis.
Tomorrow’s German IFO business climate measures could cause further Euro to Pound (EUR/GBP) movement ahead of Friday’s UK retail sales figures.
Euro Exchange rate update – 25/04/14
After this week’s encouraging manufacturing/services data for the Eurozone and Germany and Germany’s impressive business confidence report, the Euro has regained the upper hand against the Pound.
Although Sterling edged up slightly against several of its currency counterparts following the release of UK retail sales data, the Euro to Pound pairing was fairly static.
However, next week’s UK growth data is expected to show quarterly expansion of 1.0 per cent – the most impressive result for nearly four years. If the actual figure meets or exceeds this estimate Pound gains are likely and the British asset could well post a notable advance against the Euro.
Next week’s UK manufacturing PMI and consumer confidence report will also be responsible for EUR/GBP movement.
Meanwhile Euro fluctuations could be occasioned by German retail sales, consumer confidence and inflation data. If the German consumer price index adds to the case for the European Central Bank introducing additional stimulus the Euro could falter.
After several weeks of flat trading investors will be hoping for a surprising development or significant shift in the market.
Euro Exchange Rates -23/04/14
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8232,
Euro,,US Dollar,1.3840,
Euro,,Canadian Dollar,1.5282,
Euro,,Australian Dollar,1.4906,
Euro,,New Zealand Dollar,1.6115,
US Dollar,,Euro ,0.7245,
Pound Sterling,,Euro,1.2150,
Canadian Dollar,,Euro,0.6546,
Australian Dollar,,Euro,0.6704,
New Zealand Dollar,,Euro,0.6209,
[/table]
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