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EUR USD Strengthens as Eurozone Private Sector Posts Best Quarter Since Debt Crisis

The Euro US Dollar (EUR USD) exchange rate pushed higher this morning following the release of the Eurozone’s latest PMI figures.

Euro (EUR) Jumps as PMI’s Impress

The Euro leapt against the US Dollar in early trade today as the release of the Eurozone’s latest PMI results helped to reinforce confidence in the bloc’s growth.

Both the Eurozone’s Manufacturing and Services sectors posted robust figures this month, with data released by IHS Markit reporting that activity in each sector expanded by 57.3 and 54.7 respectively and despite the services sector slowing slightly from a high of 56.3 in May, the figures continued to paint an impressive picture of the Eurozone economy growth.

In fact today’s data actually shows that the private sector has grown at is fastest pace in six years during the second quarter, with the sign of continued recovery in the bloc leading some analysts to even go so far as to predict that it could prompt the European Central Bank (ECB) to reconsider its dovish stance towards monetary policy in the second half of 2017.

Julien Lafargue, European equities strategist at the J.P. Morgan said;

‘Activity in the Eurozone remains at very healthy levels and consumer confidence is at its highest level in 16 years. In addition, despite the recent drop in commodity prices, inflation dynamics remain supported by a large backlog and supplier delivery delays worsening to the greatest extent for just over six years.’

‘As such, we believe the ECB could adopt a relatively more hawkish stance in the coming months.’

US Dollar Weakened by Rate Speculation

The US Dollar trended lower on Thursday as markets speculated on the likelihood of a third rate hike from the Federal Reserve later this year.

While many Fed policy makers have made increasingly hawkish statements over the past couple of weeks, indicating that a third rate remains on the table, analysts appear to remain sceptical in light of recent economic data.

Market odds of another rate hike still going ahead this year remain around only 40% according to CME Group’s FedWatch tool, with slowing growth and anaemic inflation both pointing to suggestions that the Fed will likely miss its initial target to raise interest rates three times in 2017.

EUR USD Forecast: US PMI Flash Ahead

Looking ahead the US Dollar may recoup some of its losses later this afternoon with the release of the latest US PMI flashes for June, with economists forecasting that both the Manufacturing and Services sector will have crept slightly higher at the end of the second quarter.

The ‘Greenback’ may also be bolstered by the latest New Home Sales figures as well, with the data expected to show that 597,000 newly build homes were sold in the US in May, up from 569,000 the month before.

Meanwhile the Euro is expected to advance at the start of the next week as analysts predict that Germany’s latest Business Climate report will reflect the recent strength seen in the Eurozone and rise from 114.6 to 115.1 in June.

Current Interbank Exchange Rates

At the time of writing the EUR USD exchange rate was trending around 1.1170 and the USD EUR exchange rate was trending around 0.8950.