The Euro (EUR) strengthened against the Pound (GBP), US Dollar (USD) and other major peers on Thursday after data released in the Eurozone showed that the region got back onto the path to recovery in July.
According to data compiled by Markit, the Eurozone’s manufacturing and services sectors saw activity strengthen in July.
A composite PMI for both sectors leapt from June’s figure of 52.8 to 54 to match the three-year high recorded earlier in the year.
The figure was better than economist expectations for an unchanged reading of 52.8.
The cause for the improvement was a solid improvement seen in Germany, the Eurozone’s largest economy.
Markit’s preliminary composite Purchasing Managers’ Index (PMI) of activity in the manufacturing and services sectors that make up more than two-thirds of the economy came in at a three-month high of 55.9, up from 54.0 in June.
An improving picture in the Eurozone’s periphery nations also offered support to the Euro. Earlier in the session data showed that unemployment in Spain eased from 25.93% to 24.47% in the second quarter, a figure which beat economist expectations for a figure of 25.2%.
Despite the positive growth figures economists warned that the pace of growth is not yet strong enough to affect the region’s stubbornly high unemployment rate.
‘Business activity picked up again in July to suggest that the economy is growing at one of the strongest rates we have seen in the past three years. At the same time growth is not fast enough to encourage firms to take on staff in sufficiently large numbers to have a meaningful impact on unemployment,’ said Chris Williamson, chief economist at Markit.
The Pound eased from a 22-month high against the Euro after retail sales in the UK increased less than forecast in June. On a monthly basis retail sales increased by just 0.1%, below economist expectations for a rise of 0.4%.
Year on year sales were up 3.6%, below the 3.9% target expected. The cause for the weaker than forecast data was likely a result of the England football teams poor performance in the World Cup. Sales of beer and foodstuffs would have been higher if the team had done better.
Despite the gains seen on Thursday, the Euro remains under pressure due to the diverging monetary policy of the European Central Bank and other major central banks. Concerns that fresh sanctions against Russia could have a negative effect upon the region’s economy are also weighing.
Euro Exchange Rate News:
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