Euro Hits 5-day High Following Robust Services PMI

The EUR/USD recovered above 1.1200 on route to a five-day peak at 1.1270. The 200-day moving average at 1.20 provides target resistance. Greek uncertainties persist, but broad dollar weakness is underpinning the currency pair following yesterday’s big trade deficit miss in the US, which risks a negative revision in Q1 GDP data. The dollar’s yield advantage over the euro has narrowed to the 167 basis points at the 10-year maturity comparison. Momentum on the currency pair is positive with the MACD printing at its highest level in the past 12-months.

Eurozone final Markit services PMI beat expectations in rising to 54.1 in April, up from the flash estimate of 53.7 but slightly down on March’s 54.2. The composite PMI worked out at 53.9, up from the flash estimate of 53.5 but down on the 54.0 March figure, which was an 11-month high. Highlights from the national data include Germany’s services PMI dipping to 54.1 from the flash 54.4 figure and down from 55.4 in March, while the French services PMI fell to 51.4 from 52.4. Overall, the stagnation is expansionary momentum in the composite PMI between March and April is a disappointment, though gains in Spain and elsewhere are encouraging as activity picks up outside the core economies.

Spain’s Markit April services PMI was a standout surging to 60.3 after 57.4 in March, surpassing the median forecast of 57.4 by a big margin. This adds to the growing line of encouraging data out of Spain. Tuesday’s unemployment figure, for instance, fell much more than expected, by 118.9k, twice the decline seen in March. The services PMI, at 60.3, is the best since November 2006 and indicates robust expansion in the sector. Spain’s composite PMI rose to 59.1 from 56.1, and the new business index rose to 60.9 from 59.9 in March, the best since June 2000.

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