Market Overview

Euro Above $1.25 Despite Poor PMI

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Euro Above $1.25 Despite Poor PMI
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The euro looked set to finish the week above $1.25 despite PMI data that showed the region’s businesses continued to struggle in the fourth quarter. The common currency traded at $1.2547 at 7:00 GMT on Friday morning as investors took the region’s weaker than expected data as a sign that the European Central Bank would make a move in December.

Reuters reported that Markit’s Composite Flash Purchasing Mangers’ Index for the eurozone fell to 51.4 in November, far below analysts’ expectations and dangerously close to the 50.0 mark that separates expansion from contraction. The region’s service PMI was also disappointing as it fell to 51.3, and factory PMI fell to an even more concerning 50.4. Even more worrisome was the bloc’s measure of new orders, which fell for the first time in more than a year in spite of price cutting efforts.

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The PMI figures out on Thursday are likely to weigh on the European Central Bank as it decides whether more stimulus measures are necessary. Though the bank has been cautious about easing further before the stimulus packages announced this summer have a chance to make an impact, the region’s worsening economic data suggests that the bloc’s situation is becoming dire.

While the bank may be happy to wait if the regions growth were to be stagnant, the worsening figures suggest that a downturn is on the horizon. Moving forward, investors will be looking for commentary from European central bankers as the ECB’s December meeting approaches. Most are betting that the bank will be compelled to act at some point in the future, with some expecting to see policy changes as early as next month.

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