Euro Climbs to Higher Ground on Robust PMI Data
Europe’s common currency emerged as winner on Thursday, as positive PMI data boosted confidence in Eurozone recovery.
Markit group’s composite gauge of Eurozone business activity rose to a 31-month high in January, led by robust manufacturing output and strong service sector activity. The PMI Composite Output Index for manufacturing and services rose 1.1 percentage points to 53.2, topping estimates.
A strengthening Eurozone economy at the start of the year translated into healthy gains for the common currency. The EURUSD pair rose to its highest level since January 3, soaring 144 pips to 1.3692. The pair broke three resistances in the process.
The EURGBP pair rose 58 pips to 0.8232, erasing the one-year low incurred in the previous session. Sterling was supported Wednesday after UK unemployment fell to 7.1 percent in the three months to November. The pair’s next resistance is at 0.8246. Technical support is ascending at 0.8092, 0.8113 and 0.8133.
A separate report from the European Commission showed Eurozone consumer confidence improved in January. The consumer confidence indicator improved from -13.5 to -11.7, surpassing the long-term average of -13.3 for the first time in two-and-a-half years.
Eurozone recovery is expected to gain traction in 2014. The 18-nation currency bloc will grow at an annual rate of 1 percent, according to forecasts. However, stubbornly low inflation and record-high unemployment continue to undermine the euro area’s long-term objectives. The common currency came under intense scrutiny earlier in the week after the European Commission published its latest report, ‘Employment and social developments in Europe 2013.’ According to the report, Eurozone membership has led to growing inequality among member-states. The loss of sovereignty associated with Eurozone membership means member-states are unable to devalue national currencies to boost competitiveness, which has forced some nations to accept lower living standards.
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