Mixed PMI data from several Eurozone countries caused increased volatility in European currency pairs on Thursday morning.
Preliminary estimates for France were surprising for their strength. Manufacturing PMI jumped from 43.1 to 46.8 (43.5 expected). The services index rose from 45.4 to 48.0 (45.7 expected). These figures far exceeded expectations, boosting risk appetite and supporting buying in both the single currency and equities.
However, the euro's rise to 1.0887 came to a screeching halt with the release of exact figures from Germany, where the manufacturing index fell to 42.3 from 45.5 (46.1 expected). The services index rose to 48.2 from 47.7 (48.0 expected).
For the euro zone, the manufacturing index fell from 46.6 to 46.1, compared to expectations for an increase to 47.0. The services sector reached the critical milestone of 50.0. Readings below this level indicate a month-on-month contraction, and the eurozone headline composite PMI remained in contractionary territory for the seventh consecutive month. However, it has risen to 48.9, the highest level since June last year.
EUR/USD rose for the seventh consecutive session. The bulls tested the 200-day average earlier in the week and the pair traded above this important trend indicator on Thursday morning. For much of last month, the pair was bought on dips below this line and clearly did not want to stay away from it for long in February. The ability to attract buyers from these levels could establish a sustained uptrend.
However, the course of operations suggests that it will be a very bumpy and uneven road. On Thursday, in addition to disappointment over weak German data, the 50-day moving average acted as resistance. This dynamic suggests that we may see an intense back-and-forth in the coming days before the bulls can mount an offensive.
Fundamental pressures on the euro versus the euro include expectations that the Federal Reserve will begin cutting rates well before the ECB.
The FxPro Analyst Team
