The Euro advanced on the US Dollar following surprisingly strong services PMI and retail sales data for the Eurozone
The Euro Exchange Rate was in the region of 1.3056 against the US Dollar as of 10:25 am GMT
Investors might be waiting for tomorrow’s Eurozone GDP figures (which are largely expected to show contraction) but several pieces of influential data for the currency bloc have caused Euro movement today.
Firstly, the region’s services PMI revealed that the sector didn’t shrink by as much as previously estimated. Although initial figures published by Markit Economics put services PMI falling from 48.6 to 47.3, this revised data has shown an actual reading of 47.9.
As the PMI report stated: ‘the index therefore signalled a steepening of the downturn in business activity, contrasting with the easing trend which had been evident in the three months to January. However, the rate of decline remained less severe than seen in any of the nine months prior to January, and the average contraction seen over the first quarter so far has been the smallest since the first quarter of last year.’
In an accompanying comment Markit’s chief economist Chris Williamson asserted: ‘The dip in the Eurozone PMI compared to January is a disappointment, but the region still looks set to see a much smaller drop in GDP in the first quarter compared to the 0.6% decline seen in the final quarter of last year, with the PMI so far consistent with a 0.2% GDP decline. Worryingly, the divergence between Germany and France so far this year is the widest in the 15-year survey history. Germany is on course to see the strongest quarterly growth since the spring of 2011, but France is contracting at the fastest rate for four years. […] The outlook therefore seems to largely depend on whether Germany can continue to expand and offset the weakness in France, Italy and Spain, which seems a tall order, meaning hopes of a return to growth for the region by mid-2013 are now looking too optimistic.’
Despite the negative tone the better-than-expected figure saw the Euro gain, rising against the US Dollar for a second day. The Euro climbed against several of its most traded peers yesterday after EU finance ministers commented that some nations might be in a position to loosen deficit reduction targets.
The Euro is likely to continue advancing in the hours ahead as retail sales figures for the Eurozone also exceeded expectations. Although economists estimated that in January retail sales for the region would gain by 0.2 per cent they actually increased by a seasonally adjusted 1.2 per cent.
Considering the fact that retail sales in the 17-nation currency bloc dropped by 0.8 per cent in December this is a surprisingly strong result.
In January retail sales were down by an annualised rate of 1.3 per cent from the same period of 2012, significantly better than the 2.9 per cent decline forecast.
If tomorrow’s GDP figures similarly trounce expectations the Euro could resume the upward trajectory seen at the beginning of this year.
Gains against the British Pound might be limited as the UK, like the Eurozone, posted better-than-forecast services PMI and retail sales data, causing the Pound to broadly strengthen.
Euro Exchange Rates
As of 10:25 am
The Euro to Pound Sterling (EUR/GBP) exchange rate is trading in the region of 0.8596
The Euro to US Dollar (EUR/USD) exchange rate is trading in the region of 1.3056
The Euro to Australian Dollar (EUR/AUD) exchange rate is trading in the region of 1.2758
The Euro to New Zealand Dollar (EUR/NZD) exchange rate is trading in the region of 1.5748
The Euro to Canadian Dollar (EUR/CAD) exchange rate is trading in the region of 1.3392
The Euro to Japanese Yen (EUR/JPY) exchange rate is trading in the region of 121.4060
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