EUR/USD Starts 2018 at Three Year High as Manufacturing PMI Impresses
The Euro US Dollar (EUR/USD) exchange rate raced higher on the first European trade session of 2018 this morning following an impressive Manufacturing PMI reading from the Eurozone.
EUR/USD climbed 0.56%, to strike a new three-year high this this morning following the release of the factory figures as they capped off a stellar year of economic growth in the Eurozone.
Euro (EUR) Surges as Eurozone Factory Activity Strikes Record High at the End of 2017
The Euro skyrocketed against the US Dollar this morning as the final reading of the Eurozone’s December manufacturing PMI confirmed that factory activity stuck a record high at the end of 2017.
According to the figures compiled by IHS Markit, the Eurozone factory PMI rose from 60.1 to 60.6 in line with forecasts as the sector expanded at its fastest pace since the survey began in 1997.
While the rise in manufacturing activity was fair broad based across the bloc, Germany, the Netherland, Austria and Ireland were particularly singled out as all four countries struck or were close to striking record highs.
Also encouraging was the upbeat outlook from the majority of firms surveyed in the index, with many hopeful that the current uptrend in growth will persist into 2018.
Chris Williamson, Chief Business Economist at IHS Markit, said;
‘The eurozone manufacturing boom gained further momentum in December, rounding off the best year on record and setting the scene for a strong start to 2018.’
‘Forward-looking indicators bode well for the New Year: new orders rose at a near-record pace, while purchasing growth hit a new peak as firms readied themselves for higher production.’
The EUR/USD exchange rate was further bolstered by hope that the stellar growth witness in 2017 and the expectations of further growth in 2018 may prompt the European Central Bank (ECB) to a little more hawkish this year, although persistently low inflation will likely prevent policymakers from making any monetary tightening.
Disappointing 2017 for the US Dollar (USD) Looks Set to Persist into 2018
The US Dollar stumbled out the gate at the start of trading in 2018 as investors remain wary of the currency after its poor performance over the last twelve months.
The Dollar index -which measures USD against a basket of major currencies, including the Euro- fell more than 9.8% in 2017, the US Dollar’s worst year of performance since 2003.
The most recent dip appears to have been largely prompted by a drop in benchmark U.S. 10-year Treasury yields at the end of 2017, which has caused markets to shun the US Dollar.
However USD is also being pressured by a pessimistic outlook amongst investors for the coming year, with many sceptical whether the recently passed tax cuts will deliver the economic growth that has been promised by the Republicans.
EUR/USD Forecast: German Unemployment Rate to Slide?
Looking ahead the EUR/USD exchange rate may continue to push higher on Wednesday as Germany publishes its latest employment statistics, with economists forecasting that the nation’s jobless rate may have fallen from 5.6% to 5.5% in December.
Meanwhile the US Dollar may find some respite tomorrow should the latest ISM manufacturing PMI reveal that US factory activity remained robust in at the end of 2017, with analysts predicting that the index will have held at 58.2 in December.