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Solid European PMI’s Boosts Euro Versus Sterling

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The Euro gained traction against the pound on Wednesday after slicing through support levels Tuesday.  Better than expected PMI results in Europe were able to help the currency pair move forward despite the large ECB QE that continues to generate headwinds for the Euro.

The manufacturing data in Europe on Wednesday had an overall positive slant, with Germany, Italy and the UK showing the best results.  The UK Markit manufacturing PMI survey came in at 54.3 in March, fractionally above estimates and improving from February’s 54.1 reading. This is the third consecutive month of improvement, affirming that activity in the sector is reaccelerating after a soft patch in Q4 last year.

The construction PMI will be released on Thursday, and is anticipated at 60.3 from 60.1 in February, which would indicate decent expansion in the sector. The January services PMI will be released the following Tuesday, Apr 7, 2015 as Friday and Monday are UK public holidays.

The Eurozone Mar manufacturing PMI was revised up to 52.2 from 51.9 reported initially, and up from 51.0 in February. This marks a further acceleration in the pace of activity, thanks to marked improvements in Germany and Italy, which both posted 11 months highs. The French reading improved, but remains stuck in contraction territory, while the Spanish reading nudged only marginally higher, although it remains at very high levels. Markit reported that faster growth is driving job creation and that the weaker EUR is boosting export demand.

The EURGBP rebounded back to the 10-day moving average after falling through support on Tuesday.  Resistance is now seen near 0.7295, while support is seen near Wednesday’s low at 0.7215.  Momentum remains positive with the MACD (moving average convergence divergence) index printing in positive territory but the trajectory has flattened, as the currency pair has consolidated.

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