Euro to US Dollar Firms on Mixed Eurozone Data and Fed Minutes

May 21, 2015 - Written by Frank Davies

STORY LINK Euro to US Dollar Firms on Mixed Eurozone Data and Fed Minutes

Euro to US Dollar Firms on Mixed Eurozone Data and Fed Minutes

The Euro advanced against the US Dollar for the first time in four days as the currency received support from the release of economic data, which showed that the French economy is showing signs of a recovery. Data released by Markit showed that manufacturing and service sector activity improved in May. The manufacturing Purchasing Managers Index (PMI) increased to a reading of 49.3, up from the preceding month of 48.0 and was better than economist expectations for a figure of 48.5. The services PMI increased to 51.6, up from the previous months figure of 51.4, but slightly below forecasts for a reading of 51.9. The nation’s composite index, which combines both manufacturing and service sectors, rose to 51.0, up from the 50.6 figure seen in the previous month.

‘The French private sector posted further modest output growth in May, suggesting that economic expansion is being maintained through the second quarter. The service sector remained the driver of growth, offsetting another contraction in manufacturing,’ said Jack Kennedy, Senior Economist at Markit.

As the session progressed, the single currency gave up some of its earlier gains as PMI data out of Germany disappointed. The flash German composite output index in the Eurozone’s largest economy fell to a five-month low of 52.8 in May. The flash German services PMI fell to 52.9 also a five-month low. Manufacturing PMI meanwhile fell to its lowest level in three-months to a reading of 51.4. German firms were reporting weak demand, rising cost pressures and export orders were shown to have expanded at the slowest rate in three months.
Following on from the German and French, data were PMI reports for the wider Eurozone. The data showed that service sector activity in the region expanded to a reading of 53.3, manufacturing to 52.3 and the composite rose to 53.4. Current account data meanwhile showed that the region’s surplus widened to €24.9 billion from a revised level of €14.7 billion.

The US Dollar meanwhile was softened by the minutes of the Federal Reserve’s May policy meeting. The minutes showed that policy makers will not raise interest rates in June as had been previously expected.

‘Although they contained no outright surprises, the April FOMC minutes showed a few signs of participants growing more concerned about downside risks to the economic outlook, with little mention of offsetting upside risks,’ said analyst at JPMorgan.

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