The Euro to Pound (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates strengthened on Tuesday after the single currency was supported by positive economic data out of France, Germany and the wider Eurozone.
Earlier in the session, the single currency found support as a report showed that manufacturing activity in Germany rebounded in December after sliding into contraction territory in November.
A separate report showed that the nation’s service sector expanded at its slowest pace in 17 months.
According to Markit, its preliminary German manufacturing purchasing managers index (PMI) rose to its highest level in two months of 51.2 this month, up from the preceding month’s level of 49.5. The figure was also better than economist forecasts for a reading of 50.4.
Data out of France also offered support as it showed that the downturn in the nation’s services industry has eased. Markit’s preliminary services purchasing managers’ index (PMI) rose to 49.8 in December from 47.9 last month, beating a consensus forecast for a 48.3 reading.
‘There are signs that maybe a bottom has been reached in France. Resumption of growth in services will pull the overall sector PMI above 50 in January provided we continue to see the improvement we’ve seen, especially in relation to new orders,’ said Markit’s chief economist Chris Williamson.
As the session progressed, the Euro made further gains after the ZEW institute said that it’s monthly index, which measures investor economic outlook for the next six months surged by 23.4 points to a reading of 34.9 in December. The rise marks a second consecutive monthly increase.
The cause of the rise in sentiment was down to a weaker Euro and falling oil price prices. The weaker currency and cheaper fuel increased hopes that the Eurozone’s largest economy will see a pickup in the New Year.
Pound Sterling (GBP) Exchange Rate Weaker on Inflation Data
The Pound softened against the Euro after a report released by the London based Office for National Statistics (ONS) showed that inflation in the UK slowed to 1%, the lowest level seen since 2002.
The report lessened the likelihood that the Bank of England (BoE) will choose to raise interest rates.
‘It gives the BoE plenty of room to leave policy ultra-loose. We had been thinking that it may hike soon after the general election in May, but given the lack of inflation pressures a third-quarter move is more probable,’ said an economist from ING Bank.
US Dollar (USD) Exchange Rate Softens on Housing Data
The US Dollar weakened against most of its major peers as the positive Eurozone data increased risk sentiment and as domestic American data showed that housing starts and permits fell in November.
According to the Washington based Commerce Department, the number of new homes started declined by 1.6%, building permits meanwhile fell by -5.2%.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.2527 ,
Euro,,British Pound,0.7955 ,
Euro,,Australian Dollar,1.5219 ,
Euro,,Canadian Dollar,1.4575 ,
[/table]
