The euro jumped against most major counterparts after German PMI data which indicated that manufacturing in Europe’s growth engine grew more than expected which eased some concerns amongst investors about recession in the euro zone.
The PMIs are seen as a key gauge of whether the euro zone’s deepening sovereign debt crisis, which is recent weeks has spread from the periphery to the core economies of Italy and Spain, is weighing on broader economic growth.
German flash manufacturing index remained unchanged for the previous 52.0 but economists had forecast it to drop to 50.8.
Overall euro zone flash manufacturing PMI also came in better than expected in August at 49.7 beating predictions of a drop to 49.5 from the previous month’s 50.4.
A number below 50 in the index is not good as it means that activity is contracting and shows a slowdown in euro zone manufacturing activity, however, investor sentiment was improved because at least the results were not as bad as initially forecast.
However, French manufacturing PMI dropped below expectations.
But euro still rose against the dollar as well as against the yen, Swiss franc and British pound.
China’s better than expected PMI data earlier in the day lifted market sentiment which helped give an additional boost to the euro.
After the German and euro zone data, EURUSD rose to a session high of 1.4486 versus the open price of 1.4372. EURGBP peaked at 0.8750 from an early session low of 0.8714.
However, after the German ZEW economic sentiment and European sentiment data which both fell much worse than expected, EURUSD fell sharply to 1.4439 within a minute of the release of the data at 09:00 GMT but soon rebounded where it is currently trading at 1.4500 by 09:30 GMT.
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