Despite low trading activity due to US and Japanese holidays, the euro gained ground on Thursday as data showed the economic slowdown in the euro zone may be beginning to abate.
Because to the Thanksgiving holiday and the closed markets in Japan and the US, there was considerable volatility in currency trading due to lower-than-normal liquidity.
A depressing assessment of French company activity was countered by a rush of early polls suggesting that the recession in Germany, the economic powerhouse, may be less than anticipated.
With regard to Thursday’s flash Composite Purchasing Managers’ Index (PMI) for November, “there has been a bit of an upside surprise on Germany and the euro zone and yes, it’s an improvement over the prior, but all this is saying is things are getting slightly less bad,” TraderX strategist Michael Brown stated.
As per the study, there is a possibility of another recession in the fourth quarter of the euro zone economy.
This month, the PMI for the bloc’s leading services sector increased from 47.8 to 48.2, which is little higher than the Reuters poll expectation of 48.1 but still far below contraction zone.
November saw a further decline in manufacturing activity, which has decreased each month since July 2022. Although it topped the poll’s predicted score of 43.4, the PMI increased to 43.8 from 43.1, still falling short of breakeven.
“It’s not exactly cause for much optimism … and basically reiterates what we already knew: that the economy is facing a tough winter ahead,” Brown stated.
The euro reached a high of $1.0931 earlier in the day and ended the day up 0.18% at $1.09075.
The analysts at Saxo Bank wrote in a report, “Euro/dollar trades back above $1.09 but may face formidable resistance above at $1.096.”
Following far-right populist Geert Wilders’ unexpected victory in Wednesday’s Dutch parliamentary elections, the markets responded with subdued reactions. Wilders is anti-EU.
When British Finance Minister Jeremy Hunt issued a budget update on Wednesday that predicted far less growth than previously planned and a flurry of tax cuts and subsidies for Britain’s faltering economy, the value of sterling rose somewhat versus the dollar after falling 0.3%.
A different analysis of UK business activity revealed that, following three months of decline, businesses indicated a little return to growth in early November, which somewhat strengthened the pound.
After the PMI data, sterling reached a high of $1.2575 and was last up 0.3% for the day at $1.2538.
After recovering from two-and-a-half-month lows the day before, the dollar index dropped 0.14%, its first decline since Monday, as data revealed that fewer Americans than anticipated filed new claims for unemployment benefits last week.
A University of Michigan study that revealed consumers this month expect rising inflation both in the immediate and long term was another concerning sign for the Federal Reserve.
According to CME Group’s FedWatch tool, markets have reduced their expectations of a rate cut by the Federal Reserve in 2024. Futures now indicate a 27% possibility that the Fed will drop its target rate at the March policy meeting, and that chance will rise to 40% by May.
The yen has benefited from the dollar’s decline and speculation that the Bank of Japan may abandon its extremely loose monetary policy in 2019.
The yen reached a two-month high of 147.155 on Tuesday, retreating from the first week’s low of 152 per dollar. At 149.59, it was last traded.
In the cryptocurrency space, Binance CEO Changpeng Zhao resigned and entered a guilty plea to violating federal anti-money laundering rules in the United States. This action was taken as part of a $4 billion settlement that ended a multi-year investigation into the largest cryptocurrency exchange in the world. Bitcoin had a 1% decrease to $37,047 after over 5% gain on Wednesday.