EUR/USD hits daily highs as German business climate sharply improves

The euro advanced to daily highs against the US dollar on Friday, after a report by the Ifo research institute revealed that business climate in Germany suddenly improved in November, while additional support for the common currency was still provided by comments made by European Central Bank (ECB) President Mario Draghi.

EUR/USD hit a session high at 1.3527 at 9:00 GMT, the highest point since November 20th, after which consolidation followed at 1.3515, gaining 0.26% for the day. Support was likely to be received at November 20th low, 1.3416, while resistance was to be met at November 20th high, 1.3564.

According to the results in a survey of 7 000 business entities in Germany by the Ifo institute, released earlier in the day, business climate in the country demonstrated a significant improvement in November, as sales prospects increased in all sectors of the economy. This report came as another evidence that economic recovery in Germany was picking up the pace during the last quarter of the year, and also implied that economic growth during next year may strengthen even further. The index of business climate, reflecting companies expectations for business conditions in the next six months, climbed 1.9 points to reach a value of 109.3 in November, completely neutralizing the unexpected drop, recorded in October. Experts projections have also been exceeded, as they pointed a lesser advance, to 107.7 in November.

The sub-index of economic expectations also registered a sharp increase in November, reaching a reading of 106.3, following the revised up result of 103.7 in October (103.6 previously). Preliminary estimates pointed a far lesser advance, to 104.0 in November.

The other component of the overall index of business climate, the sub-index of current assessment, rose to a value of 112.2 in November from 111.3 in the preceding month, while experts had projected a slight increase to 111.5.

These data points came in consonance with the upbeat data, regarding activity in the sectors of manufacturing and services in Germany, announced on Thursday. What is more, this may dissipate concerns that the experienced economic slow down in the country during the third quarter of the year will cause a negative impact upon growth in the fourth quarter and in 2014.

According to data by Markit Economics, the preliminary value of the manufacturing PMI for Germany advanced to 52.5 in November from a final reading of 51.7 in October, while the preliminary services PMI in the country rose to 54.5 in November, with its final value standing at 52.9 during the preceding month. This report heightened the appeal of the euro on Thursday.

The common currency still remained supported, after yesterday European Central Bank President Mario Draghi played down speculation, that the bank was actively considering whether to impose negative interest rates on deposits. He said that such a measure has only been discussed at central bank’s last policy meeting.

Meanwhile, the US dollar briefly received support against the euro on Thursday, after the Department of Labor said that the number of people who filed for unemployment assistance in the United States decreased by 21 000 to reach 323 000 during the week ending on November 16th 2013, or the lowest number since September. Expectations pointed that the number of claims will fall less, to 335 000. Last week contained a national holiday, as during such days the number of submitted claims is lower than usual. The average number of claims during the past four weeks, an indicator considered as lacking seasonal effects, dropped by 6 750 to 338 500.

Another positive impulse for the US currency came after, also yesterday, Markit Economics reported, that the index, gauging manufacturing activity in the United States, rose to a reading of 54.3 in November, according to preliminary data, marking an eight-month high. The final value of the manufacturing PMI came in at 51.8 in late October. Values above the key level of 50.0 are usually considered as an indication that activity in the sector has increased, as November’s result implied an even faster pace of expansion. The sub-index of new orders also registered a higher rate of increase in November, while the sub-index of employment demonstrated a drop.

Elsewhere, the euro was gaining ground against the sterling, with EUR/GBP cross up 0.26% on a daily basis to trade at 0.8345 at 10:48 GMT. EUR/JPY pair was advancing 0.32% to trade at 136.84 at 10:49 GMT.