The euro continued trading on positive territory against the US dollar on Wednesday, following the release of mixed data regarding activity in the services sector in Euro zones first four largest economies, while the European Central Bank (ECB) was seen by economists to abstain from reducing the benchmark interest rate at its policy meeting.
Having fallen to its lowest level since September 18th at 1.3442 on November 4th, today EUR/USD reached a session high at 1.3521 at 4:00 GMT, after which consolidation followed at 1.3505, rising 0.22% for the day. Support was likely to be found at November 4th low, 1.3442, while resistance was to be met at November 1st high, 1.3581.
According to data by Markit Economics, the final value of the index gauging services sector activity in Spain came in at 49.6 in October, surpassing the preliminary value of 49.0. However, this figure implied that activity in services continued to shrink. On the other hand, the gradual increase in the sub-index of new orders gave certain indications that a revival is to be expected in the coming months. According to Markit, the rate of hiring in Spanish services sector has slowed down considerably.
Italian final services PMI slowed down to a reading of 50.5 in October in comparison with a preliminary estimate of 52.7.
In France, the final value of the services PMI climbed to 50.9 in October, as the preliminary reading pointed 50.2. Activity in the sector rose for a second month in a row, as the sub-index of employment climbed for the first time in the past one year and a half in October.
In Germany, the final value of the services PMI also outperformed the preliminary estimate for October, with the index coming in at 52.9 instead of 52.3. In September the PMI stood at 53.7. This data showed that the sector has been developing in a positive manner for a fifth consecutive month, with German economy continuously improving at the start of the final quarter of the year. According to Markit, the rate of improvement was in consonance with the overall trend, which began during the summer period.
Euro zones services PMI also beat the preliminary reading, advancing to 51.6 in October compared to 50.9, as initially estimated.
The euro gained ground against the greenback as the ECB is expected to leave the main refinancing rate at current record low level of 0.50% at the policy meeting on Thursday, according to 67 out of 70 respondents participated in a survey by Bloomberg News. Bank of America Corp., Royal Bank of Scotland Group Plc and UBS AG, however, project that the central bank will reduce its benchmark rate.
“The ECB still has a much better balance sheet than the Fed, so I wouldn’t be surprised if we see some euro strength from here,” said Kara Ordway, a currency strategist at City Index Group Ltd. in Sydney, cited by Bloomberg. “I can’t see the ECB announcing anything, so as long as we don’t see any surprises from them, the euro is likely to find support around these levels.”
Meanwhile, US Gross Domestic Product probably expanded at a 2% annualized rate during the third quarter of the year, slowing down in comparison with the 2.5% growth, recorded during the previous three months, according to the median estimate of economists in another survey. The official GDP report is due to be released tomorrow.
Federal Reserve Bank President for San Francisco, John Williams, said on Tuesday that US economic growth in the recent months has disappointed his expectations, partially eroding his confidence that improvement in the labor market will last without monetary stimulus.
In addition, Richmond Fed President Jeffrey Lacker said also on Tuesday, following a statement in Charlotte, North Carolina, that economy will probably expand only 2% in 2014, with no new source of strength.
Elsewhere, the euro was losing ground against the pound, with EUR/GBP cross down 0.13% on a daily basis to trade at 0.8388 at 10:13 GMT. EUR/JPY pair, on the other hand, was advancing 0.32% to trade at 133.17 at 10:14 GMT.