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Eurozone Economy Continues To Power Ahead

The Euro dollar is off to a brisk start in 2018 as the 19-member Eurozone economy continues to improve, as indicated by the Eurozone and German services PMI data reported yesterday. Most of the traders are expected to return back to desk only by next week. That may give rise to an increase in the volatility and further gains for the common currency.

The final IHS Markit Eurozone PMI Composite Output Index reading rose to 58.1 in December, from 57.5 in the previous month. It is the highest recorded reading since February 2011. A reading above 50 indicates expansion. For 54 successive months, the index has been signaling growth.

The market survey report from the financial services company also revealed that the Eurozone service sector business activity rose at the fastest pace in 80 months. The final services PMI reading of 56.5 was a notch higher than the flash estimate of 56.5, and greater than 56.2 recorded in November.

Earlier on Tuesday, IHS Markit reported a record high German manufacturing PMI reading of 63.3 in December. At 60.6 in December, the Eurozone manufacturing PMI reading was also in line with the preliminary estimates. The Eurozone economy gained momentum after ultra nationalist parties failed to gain ground in France and Netherlands.

Notably, the growth is broad-based across countries and not restricted to the economic powerhouse Germany. Notably, countries such as Italy and Ireland are showing considerable improvement in economy. That has made analysts think that the Eurozone is out of debt crisis and has returned to growth cycle.

In the third-quarter, the Eurozone economy grew 0.6%, while the unemployment has fallen to a nine year low. Hiring is at a 17-year high, according to IHS Markit. The only concern is the decline in the jobless rate is yet to reflect on wage growth and inflation, which is below the 2% target of the European Central Bank.

Commenting on the data, Chris Williamson, IHS Markit’s chief business economist stated

“New work is flowing to companies at a rate not seen for a decade and backlogs of uncompleted work are rising sharply.”

The strong Eurozone PMI Composite Output Index reading is expected to strengthen the Euro dollar against its rivals.


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