🚨Positive PMI readings from Europe and the broad dollar weakness cause EURUSD to break out of monthly highs
The euro has had a great week. If trading ended at current levels, it would be the best 5-day period since November 2023. There are at least several reasons for such strong gains, although the most important is the preliminary PMI report.
Strong data from the European economy on business sentiment indicates that pessimism may be slowly passing. The German economy was expected to do very poorly throughout 2024, but entrepreneurs now see the future a little better, primarily looking at the services sector. Positive sentiment has long been displayed by Germany's DAX, which is trading at historic peaks overnight and is doing far better than the US S&P 500.
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Open real account TRY DEMO Download mobile app Download mobile app- The Eurozone manufacturing PMI rose to 46.1, against expectations of 45.3 and the previous level of 45.1.
- The PMI for services, however, weakened to 51.4 from 51.6 on expectations of 51.5.
- However, this is the result of worse data from France, as we saw a sizable rebound in Germany's services PMI.
Improvement on the part of business expectations in Europe. Indexes still remain below 50 points, but sentiment is not as bad as it has been for most of 2024. Source: Macrobond, XTB
In recent days, we have seen a marked rise in European yields, which is stronger than the US. The yield spread has widened by about 25 basis points. Source: Bloomberg Finance LP, XTB
EURUSD has been rebounding strongly since the beginning of this week. Potentially, this could be the best week since November 2023, with growth above 2%. Today alone, EURUSD is up about 0.75%. The EURUSD pair not only realized a rebound in line with the inverted head-and-shoulders formation, but also knocked out the previous largest upward correction in the downtrend. Today, the level of 1.0500 was breached, with the prospect of the range of the current movement to the next important resistance at the level of 1.0600. On the other hand, the euro may be sensitive to Trump's announcement of the imposition of tariffs.
EURUSD, D1 interval. Source: xStation
