Eurozone PMI Gives ECB More Reason To Ease

The euro was little changed on Tuesday as investors were cautious ahead of the European Central Bank’s Thursday meeting. The common currency traded at $1.2464 at 6:00 GMT following the release of PMI data on Monday, which showed that the bloc’s manufacturing activity ground to a halt in November.

The Wall Street Journal reported that Markit’s Purchasing Managers’ Index for the eurozone as a whole dropped to 50.1 in November, a sizable decline from October’s already disappointing 50.6 reading. The November figure was troubling as it was only marginally above 50, the figure that separates contraction from expansion.

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When viewed individually, the PMI readings for eurozone nations were even more concerning, as Germany looked to be a major cause for the bloc’s overall weakness. Manufacturing activity in the region’s largest economy contracted and Germany posted a PMI score of just 49.5, down from 51.4 in October.

The PMI data added to a growing list of worrisome economic figures which all point to a stagnant economy. Most analysts see this month’s PMI data as a good indicator of the bloc’s performance in the fourth quarter, meaning the region’s economic performance will likely disappoint.

With the European Central Bank set to meet on Thursday, the PMI figures will probably play a role in the bank’s decision about how to move forward with monetary policy. Most believe the bank will step in with more quantitative easing in the near future, but Thursday’s meeting isn’t expected to yield any major changes. Instead, the bank will likely continue with its current stimulus package and try to reassure investors verbally that it will do everything it takes to support the economy.