Eurozone PMI surprises to the upside lending EUR support across the board
25/Jul/2014 • Currency Updates•
The Kiwi came under heavy pressure yesterday as the Reserve bank of New Zealand increased its cash rate by 25 bp to 3.5%. This is the fourth month on the bounce that hikes have been implemented. USD/NZD rose 1.3%.
London closed with sterling seeing a sell off and dipping against the EUR and USD.
Happy days for the UK yesterday – the IMF rose their UK growth forecast to 3.2%. This is the 5th successive quarter that revisions have come in to the upside and right now the UK is the apple of the IMF’s eye. The latest hike stems from the rapid improvement in the labour market, widespread growth across the economy and improved consumer spending.
The IMF prediction means the UK is officially tipped as the fastest growing economy worldwide. These figures would also breach levels of output not seen since 2008. Ever smug Osborne dusted off his trumpet to proclaim the figures show his economic plan for the recovery is clearly working.
London closed with the euro seeing fair gains against sterling, after a strong morning with gains against the greenback, the close saw these tail off. Fears that the Eurozone’s recovery had spluttered to a halt were soothed yesterday after PMI surprised to the upside and came in at a 3 month high of 54 in July up from 52.8 in June and well above the crucial 50 level that marks expansion. The latest data eases concerns about the state of the Eurozone economy with few in the market expecting any good news with the Eurozone having such a terrible time of late. The acceleration in activity came on the back of stronger performance from the regions dominant services sector, boosting hopes that demand is finally picking up.
Spain saw its highest annual rise in 6 years and the biggest fall in unemployment since 2006. Situations in France remain weak, manufacturing continues to lag behind the services sector and there is little chance of anything changing anytime soon.
Data of note today includes money supply.
London closed with the dollar holding gains across the board although we saw a slight dip against the euro. Weekly US jobless benefits fell to the lowest level since early 2006. The greenback was naturally helped by the strong employment indicator. USD/JPY has been pushing all week and is 0.4% up for the week. The dollar index is trading strong and the greenback remains well supported. The geopolitical turmoil has also helped the USD as traders who are slightly pranged seek cover. US stocks are expensive but continue to look pretty; there seems little chance of investors stopping their feast on US stocks anytime soon.
Data of note today includes durable goods.