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Forex News – Improved Eurozone inflation and employment data overshadow disappointing PMI

Posted on March 2, 2015 by the XM Investment Research Desk at 3:19 pm GMT

Europe_2452517bThe euro bounced higher on Monday despite the mixed Eurozone data. The Purchasing Managers Index (PMI) for manufacturing was disappointing but other than that, inflation and jobs data were better-than forecast.

The headline manufacturing PMI was lackluster in February, coming in at 51.0, remaining unchanged from the prior month and just below a recent flash estimate of 51.1. A number above 50 signals expansion and below that contraction.

However, looking at a country-by-country basis, there was a wide divergence between the economies of the 19-members sharing the single currency.

Ireland stood out with its manufacturing PMI rising to 57.5 in February from 55.1 in January. The country has been experiencing one of the strongest growth rates in fifteen years as it struggled to come out of a crisis. France was a big disappointment. Europe’s second largest economy appears to remain in a slump, as its manufacturing PMI fell to 47.6 from 49.2. The French economy has barely grown in the last three years. Last week, the European Commission granted France an extra two years to bring its budget deficit below the 3% threshold mandated by European law. Meanwhile, French Prime Minister Manuel Valls also announced that there will be more revisions to French labor rules in an effort to revive an economy.

The widening divergence between Eurozone countries poses a big challenge to the European Central Bank. The Bank hopes that the region’s manufacturing will pick up speed as it is set to begin its large-scale asset purchases of 60 billion euros a month this week in order to stimulate the economy.

On a brighter note, the ECB got some relief today as data showed Eurozone consumer prices fell less- than-expected last month. The annual rate of inflation stood at minus 0.3% in February versus a decline of 0.4% forecast. January’s rate came in at minus 0.6%.

More positive data today showed the number of jobless people across the Eurozone dropped by 140,000 in January, bringing down the official unemployment rate to 11.2% from 11.3%.

The euro benefitted from today’s data releases, rising to a high of 1.1239, up from a day’s low of 1.1159.



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