Eurozone PMI Beat Oils Euro / Pound Rate Above 0.92
The Euro to Pound exchange rate rate spiked higher on Wednesday, breaking above 0.9200 EUR/GBP, after a major European business survey indicated a continued recovery in activity, especially in the Manufacturing sector of the region's economy.
The survey of manufacturing purchasing managers - known as the Manufacturing PMI - was well above what analysts had expected, according to the report published by leading financial information provider Markit IHS.
Manufacturing PMIs in August, came out at 57.4 from 56.6 previously when a slowdown to 56.3 had been forecast.
The Composite PMI , which is an average of both Services and Manufacturing sectors, rose to 55.8 from 55.7, when a fall to 55.5 had been forecast.
The Services PMI fell to 54.9, however, from 55.4 when it had been forecast to remain unchanged.
"The Pound has dropped to a fresh eight year low against the Euro and a two month low against the Dollar, as stronger than expected Eurozone PMI figures continue to confirm the region’s recovery. The pace of recovery has in fact helped to shift the sentiment in favour of the Eurozone market, which is currently seen as the steadfast market, away from the US and UK uncertainties," says Paresh Davdra, CEO of London-based FX brokers RationalFX.
Traders, bouyed by the positive composite and manufacturing results bought the Euro heavily following the results and the EUR/GBP pair rapidly rose from 0.9160 before the release to 0.9205 only a half an hour later.
The rise in the Manufacturing component reflected ongoing strength in the region's exports which offset concerns raised by the European Central Bank (ECB) at their recent meeting that the rising Euro might start to stunt growth by making eurozone exports less price competitive.
The lacklustre Services result "was counterbalanced by further impressive manufacturing data as goods producers were able to secure new export orders at the fastest pace in six-and-a-half years," said Andrew Harker, Associate Director at Markit IHS.
He went on to add that the data boded well for Eurozone employment:
"Stronger order inflows added to capacity pressures, with manufacturing backlogs increasing to the greatest extent since mid-2006. This bodes well for the labour market as firms will likely look to hire extra staff to deal with outstanding work."
The much better-than-expected German manufacturing PMI subcomponent, in particular helped spur confidence after it showed a rise to 59.4 from 58.1, said Ipek Ozkardeskaya of LCG Capital.
The data helped ease concerns about the robustness of the German export sector amidst the recent scandal's which have hit its automobile industry.
The burst higher has reinvigorated the uptrend and the technical outlook now looks much more bullish for the Euro.
Commerzbank's technical analyst Karen Jones noted that the next target level for EUR/GBP is likely to be at 0.9250 and then 0.9400.
"EUR/GBP’s advance remains intact with the 78.6% Fibonacci retracement at 0.9170 now having been overcome. Next up are the 0.9250 area and also the 0.9400 region where the 2016 peak was made," remarked the analyst in a note earlier today.
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