- Euro (EUR) rallies as manufacturing activity hit 53.7
- Germany’s manufacturing sector continues to boom
- US Dollar (USD) eases on safe haven outflows as vaccine optimism continues
- Expectations rise that US Federal Reserve could ease policy in December
The Euro US Dollar (EUR/USD) exchange rate is jumping higher on Tuesday, paring losses from the previous session. The pair settled on Monday -0.3% at US$1.1928 at the low of the day. At 09:15 UTC, EUR/USD trades +0.4% at US$1.1980 at the high of the day.
Manufacturing activity in the Eurozone remained solid in November, despite fresh lockdown restriction being applied to some of the biggest economies such as France and Germany. The Eurozone manufacturing PMI printed at 53.7, a slight decline from Octobers 54.8, but still a very solid figure. Any figure over 50 indicates growth.
Germany continues to be the biggest driving force over recent months and that isn’t showing any signs of changing. The German manufacturing PMI recorded 57.8 in November, slightly down from the flash estimate of 57.9 but an impressive figure even so.
The manufacturing sector hasn’t suffered in the same way that the service sector suffered because it hasn’t had to close its doors.
Elsewhere the upbeat mood in the market was helping to buoy the Euro as vaccine optimism continued to lift sentiment. Moderna announced that it will be applying for US and UK emergency vaccine authorisation after final results revealed its vaccine was 94.1% effective.
The rise in risk sentiment is once again hitting the US Dollar as investors sell out of the safe haven in search of riskier assets and currencies.
Expectations are growing that the US Federal Reserve will ease monetary policy when it meets in December to help ease the hit from the covid fallout. Federal Reserve Chair Jerome Powell said that whilst the vaccine developments are very positive for the medium-term outlook, he added that the economy remains damaged and in an uncertain state.
Looking ahead, Fed Powell will testify, US ISM manufacturing data will also be in focus.