The EUR/USD pair held steady after the relatively strong Eurozone manufacturing and services PMI numbers. It is trading at 1.2220, which is 4.45% above the lowest level in March. The euro to USD pair is also just 1% below the highest point this year.
Eurozone economy recovering
The Eurozone economic recovery accelerated in May as most countries continued to ramp up their vaccination drive. This is according to the flash manufacturing and services PMI data by Markit.
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The data showed that the manufacturing PMI decline from 62.9 in April to 62.8 in May. This was a better recovery than the median estimate of 62.5. In the same period, the services PMI increased from 50.5 to 55.1, better than the median estimate of 52.3.
As a result, the composite PMI that combines activities in the manufacturing and services sector, increased from 53.8 to 56.9. A PMI figure of 50 and above is usually a sign that a sector is improving.
The strong performance was spread across the region. In Germany, the manufacturing PMI was at 64 while the composite PMI rise to 56.2. Similarly, in France, the manufacturing and services PMIs increased to 59.2 and 56.6, respectively.
These numbers paint a picture of an economy that has started to recover faster than expected as the countries started to boost their vaccination drive. Indeed, in a recent report, the European Commission said that it expects the economy to bounce back by 4.2% this year.
The EUR/USD is also reacting to the strengthening of the US economy. Recent data has shown that inflation and retail sales have done well. Also, the labour market is tightening as evidenced by the recent initial jobless claims rose by just 444k, the lowest level since the pandemic started. This means that the Fed and the European Central Bank (ECB) could start tightening soon.
EUR/USD technical analysis
The daily chart shows that the EUR/USD pair has been in a strong upward trend. This week, the pair managed to move above the important resistance at 1.2182. The pair is also being supported by the short black and the longer orange trendlines. It is also slightly above the short and longer moving averages and has formed a V pattern. Therefore, the pair may keep rising as bulls target the year-to-date high at 1.2347.