FxPro Market Review: Optimistic PMI Index Attracts Buyers' Renewed Focus on Euro

FxPro Analysis: Optimistic PMI Index Draws Buyers' Attention Back to the Euro

The preliminary estimate of the European business activity index shows that the overall Eurozone economy is accelerating, surpassing expectations and providing temporary support for the euro around the 1.08 mark.

After several months of negative news, Germany's expectations saw the largest increase this time. The Manufacturing PMI (Purchasing Managers' Index) rose from 42.5 to 45.4, surpassing the expected 43.2. Although the index is still in contraction territory (below 50), it highlights a positive trend.

FxPro Senior Analyst Alex Kuptsikevich pointed out: Germany's services sector is strengthening its expansion, with the corresponding PMI rising to 53.9, the highest level since June last year. This is a healthy growth phase, comparable to the index levels from 2013 to 2019.

Due to the weakness in manufacturing, Germany's composite PMI is only on the brink of normal levels, but the positive trend is forming an optimistic sentiment.

For the Eurozone, the positive trend in PMI is also evident. All three indices (Manufacturing PMI, Services PMI, Composite PMI) have reached multi-month highs, performing better than expected. Like Germany, the dynamics in the services sector are similar to what we observed from 2014-2019, which were relatively calm years for the Eurozone.

It is not uncommon for PMI data to significantly impact the performance of the euro or specific regional stock indices. Yesterday's release was no exception, as the euro reversed its upward trend against the dollar after a week of decline. However, the currency pair lost about 100 points during this period, appearing as a correction after an acceleration earlier this month.

If this currency pair consolidates above 1.09, the situation will become clear. If it breaks the previous highs, it will confirm the bullish trend, breaking through to 1.11 or higher levels.

We also saw an additional positive signal in the form of active buyer support above the 1.0770-1.0780 area for the euro against the dollar, located at the 50-day and 200-day moving averages, as well as the previous resistance line before the upward trend.