EUR/USD update (2nd July 2012, 14:00)

The euro reversed some of its earlier losses following better-than-expected eurozone PMI. 

The euro received a welcome boost this morning after eurozone manufacturing output contracted less than initially estimated. German manufacturing PMI eased to 45 in June from 45.2 in the previous month. The reading was better than the estimated reading of 44.7. Meanwhile, the eurozone PMI of 45.1 in June was unchanged from the prior month, exceeding consensus estimates of 44.8. The slowdown in the rates of contraction suggests we could be close to a potential turnaround in the manufacturing sector.

The euro was also supported by optimism over the deal reached at Friday’s EU summit. European leaders on Friday agreed for direct recapitalisation to stricken lenders, and also decided to use the EU rescue fund to stabilise bond markets. The ten-year Spanish government bond yield fell sharply to 6.26%, while the Italian ten-year government bond yield declined to 5.78% this morning.

The euro fell during the Asian trading session after China’s manufacturing activity contracted at its fastest pace in seven months. HSBC’s PMI fell to 48.2 in June, indicating that the shrinking demand for manufactured goods from Europe and North America was hurting the world’s biggest exporter. The official PMI also fell to a seven-month low, but in contrast to the HSBC PMI it showed an expansion at 50.2. China is one of Europe’s biggest trading partners and any slowdown in its activity affects European growth.
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EUR/USD update (2nd July 2012, 14:00)

The euro reversed some of its earlier losses following better-than-expected eurozone PMI. 

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