EURO EDGES HIGHER AFTER PMI REPORTS
The euro edged higher against the dollar on Friday after a series of PMI reports painted a mixed picture of the Eurozone recovery.
The Eurozone economy expanded at a slower rate in June, as services activity weakened more than expected. The flash Eurozone composite purchasing managers’ index (PMI) weakened to 55.7 from 56.8 in May, on a scale where 50 separates expansion from contraction.
However, euro area manufacturing strengthened unexpectedly for the month. The Eurozone manufacturing PMI gained 0.3 percentage point ot 57.3.
“The upturn is also broad-based, with the surveys signalling an acceleration of GDP growth in both France and Germany in the second quarter, as well as across the rest of the region as a whole, albeit with some loss of momentum seen across the board in June,” Markit chief business economist Chris Williamson said in a statement.
Germany, the euro area’s largest and most influential economy, also maintained a robust growth pace at the end of the second quarter. Germany’s manufacturing PMI came in at 59.3, down slightly from the previous month. The country’s services PMI edged down to 53.7 in June from 55.4 previously.
In other Eurozone data, France’s gross domestic product (GDP) expanded 0.5% in the first quarter, edging out forecasts calling for a 0.4% gain. France is the euro area’s second-largest economy behind Germany.
Meanwhile, Japan’s manufacturing expansion weakened to seven-month lows in June, data from Markit showed. The flash Nikkei manufacturin PMI slipped to 52.0 from 53.1 the previous month. Analysts expected a slight gain of 0.3 percentage point.
The Japanese yen was little changed following the report, with the USD/JPY exchange rate continuing to hover around 111.23.
In commodities, oil prices rose for a second day, although gains were tepid ahead of North American rig data. US West Texas Intermediate (WTI) futures briefly traded above $43.00 a barrel before paring gains.
The euro’s gains were modest on Friday, but nevertheless represent an important departure from the previous few sessions, which were marked by lateral moves. The 1.1122 level continues to provide immediate support. On the opposite side of the spectrum, resistance is likley to be met at 1.1242.
Consolidation was the name of the game for the USD/JPY this week. After breaking higher post-FOMC, the pair has established a predictable trading range between 111.00 and 111.70. The pair remains in an uptrend insofar as prices remain above 111.00.
Crude prices posted modest gains ahead of the North American session, but remained in a general downtrend following a series of lower lows and lower highs. WTI futures face immediate resistance at the daily high of $43.09 a barrel. Immediate support is located at $42.68, which represents the daily low.