EUR/USD strengthens on upbeat Eurozone flash PMI
EUR/USD strengthened near the psychological resistance of 1.0500 on Friday (1/24) as Hamburg Commercial Bank (HCOB) reported that the Eurozone Composite Purchasing Managers’ Index (PMI) expanded in January after contracting in the previous two months. The HCOB flash PMI report, compiled by S&P Global, showed that overall business activity improved. The Composite PMI rose to 50.2 from 49.6 in November. Economists had expected the PMI to continue to decline but at a slower pace to 49.7.
“The start of the new year is encouraging. The private sector is back in cautious growth mode after two months of contraction. The drag from the manufacturing sector has eased somewhat, while the services sector continues to grow moderately. Germany is playing a leading role in boosting the Eurozone economy, with the composite index jumping back into expansionary territory. “In contrast, the French economy is still in contraction,” said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.
The report also pointed to strong labor demand and new business in the services sector. Meanwhile, the manufacturing sector continued to suffer from job cuts and a decline in new orders.
The upbeat Eurozone PMIs have boosted the euro’s (EUR) appeal in the near term but are unlikely to improve its broader outlook, which is weak due to strong dovish bets from the European Central Bank (ECB). The ECB is set to cut its Deposit Facility rate by 25 basis points (bps) to 2.75% on Thursday and will continue to follow that process in its next three policy meetings as officials are confident that inflation pressures will sustainably return to the desired level of 2%.
Source: FXStreet
