Euro PMI figures

Delighted claps will have been heard from Mario Draghi’s chambers this morning with further confirmation of Europe’s economy gaining momentum. A regular feature in the rhetoric of European central bankers and economists is the positive impact of a weaker euro on the region’s economy; this was in evidence this morning with confirmation that export figures lifted Europe’s manufacturing sector in March. The new exports component rose to the highest in 11 months, pushing the overall reading to 52.2 and completing a run of 21 consecutive months above the ‘50’ mark, denoting expansion. The combined figure often masks pockets of weakness but a closer look at the individual country readings simply re-enforces an increasingly rosy outlook: Italy, France and Germany all outperformed the flash readings by at least 0.4 points.

As a result, current EURUSD pricing becomes difficult to justify. The bloc currency is bearing the burden placed on it by dollar bulls and their expectations of an imminent US rate rise along with the dark clouds of Greece negotiations continuing to fester overhead. There is a disconnect between underlying fundamentals and currency moves – poor risk sentiment is most culpable for driving the two apart. We see recent range lows as a floor for EURUSD and believe that an announcement next week of an agreement with Greece will bring overdue acknowledgement of Europe’s economic advances: expect an unfettered euro to fly…

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