The Euro to US Dollar (EUR/USD) exchange rate is forecast to make a sixth consecutive weekly decline and fall to its lowest level since 2003 as market attention shifts to Sunday’s Greek general election.
The Euro to US Dollar hit a session low of 1.1217
PMI Data Offers Little Support to Euro Exchange Rate
Data released earlier in Friday’s session showed that the Eurozone economy improved slightly in January. According to Markit’s composite flash Purchasing Managers Index (PMI) activity across the 19 member, Eurozone rose to a reading of 52.2 from the preceding month’s figure of 51.4. Manufacturing activity also inched higher and matched economist expectations for a figure of 51.
In a PMI any figure above 50 indicates expansion whilst a number below indicates contraction.
France however, continued to be a concern as the nation’s private sector contracted for a ninth month in a row. Manufacturing activity did show signs of improvement as the PMI rose to a figure of 49.5.
“I see France hovering close to the stagnation mark for some time,” Markit senior economist Rob Dobson said, adding that the PMIs for the euro zone’s second-largest economy could rise above 50 at some point this year – but not far above it.
Germany also showed signs of improvement as the Eurozones largest economy saw activity in its private sector expanded at a faster pace than forecast in January.
Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks activity in the manufacturing and services sectors that account for more than two-thirds of the economy, rose to 52.6 in January from a final reading of 52.0 in December.
‘What we can see in manufacturing are some knock-on effects from weakness in neighbouring countries. Still, Germany might sustain its macro-economic growth and that should have some modest benefits to other countries in the Eurozone as well,’ Mr Dobson said.
Greek Election Reason to Ditch Euros
Following the European Central Bank’s announcement of a quantitative easing programme worth €1 trillion the Euro plummeted against the strong US Dollar and other major peers. Market attention is now turning to Sunday’s Greek general election, which has the potential to create a lot of volatility for the Eurozone.
A recent poll showed that the left wing anti austerity Syriza party would garner the most support from voters. Economists are concerned that a win for Syriza could destabilise Greece’s bailout programme and could even lead to the nation exiting the Euro. As the vote draws closer, the US Dollar is forecast to make more gains.
‘The Greek election provides another reason to sell euro in case the ECB decision was not enough. A period of consolidation in the mid-$1.13 is reasonable today, but there is no reason to believe a low is in place,’ said a currency strategist from Westpac.
Euro Exchange Rates:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.1238 ,
Euro,,British Pound,0.7499 ,
Euro,,Australian Dollar,1.4107 ,
Euro,,Canadian Dollar,1.3934 ,