EUR/USD rebounds after a slight drop to near 1.1130 in Thursday’s European session as the flash Eurozone HCOB Composite PMI for August unexpectedly rose to 51.2, beating economists' expectations.
The report showed that the strong expansion came from robust growth in the service sector's activity. The Service PMI expanded strongly to 53.3 from the estimates and the prior release of 51.9. On the contrary, the Manufacturing PMI declined further to 45.6, lower than the 45.8 expected.
Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said: “The boost largely comes from a surge in services activity in France, with the Business Activity Index jumping by almost five points, likely linked to the buzz surrounding the Olympic Games in Paris. It’s doubtful this momentum will carry over into the coming months, however. Meanwhile, the overall pace of growth in the services sector has slowed down in Germany, and the Eurozone’s manufacturing sector remains in rapid decline.”
The slowdown in the German economy signaled by the PMI data is unlikely to weigh on market speculation about the European Central Bank (ECB) interest-rate outlook. Markets broadly expect the ECB is expected to cut its key borrowing rates one more time in the last quarter of this year, given that price pressures are anticipated to return to the bank’s target of 2% next year.
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