Eurozone PMIs surge higher in March and both manufacturing and services readings came in much higher than anticipated. The former jumped to 56.2 from 55.4 and the latter to 56.5 from 55.5, leaving the composite at 56.7, up from 56.0 in the previous month. After the disappointing French business confidence readings from France yesterday it looked as though the PMIs could fall back in March, but in the even the flash composite now stands a 71 months high. The separate manufacturing output PMI fell back slightly and stands a 2-months low, but this is overshadowed, but the overall improvements and Markit also reported that employment showed the largest monthly improvement since July 2007, as firms sought to boost capacity in line with the recent rise in demand. So confidence that the current trend continues remains high, which is encouraging. Risks remain, but the data will add to the arguments of the hawks at the ECB, who want Draghi to at least drop the reference to further rate cuts from the statement.
The euro has been underpinned by the PMI data EUR-USD popped over 38 pips to a peak of 1.0810, breaching yesterday’s peak and drawing in Wednesday’s seven-week peak at 1.0825. EURJPY, EURGBP and other euro crosses have seen a similar price action. The data is helping narrow the yield gap between U.S. Treasuries and Eurozone bonds, and comes with political risks having fallen following last week’s Dutch election and in light of the latest polls out of France ahead of next month’s presidential election. EURUSD resistance is at 1.0825, which encompasses this week’s high and the February-2 peak, and support is at 1.0760.
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