EUR/USD Gains As Eurozone Data Show Modest Return To Growth

The Euro managed modest gains against the US Dollar on Friday, which helped the Eurozone economy manage some growth last month. The S&P Global’s Composite Purchasing Managers Index for the currency bloc climbed to a seven-month high of 50.3 in January.

That was above both December’s 49.3 and a preliminary reading of 50.2. The figure was also above the key 50 mark, separating expansion from contraction for the first time in seven months.

These figures came after better official figures from Eurostat earlier in the week. They showed that the Eurozone economy expanded by 0.1% in the final quarter of 2022, outperforming expectations for a 0.1% drop.

Objectively these are not exactly stellar numbers, but they at least raise some hope that outright recession can be avoided across the currency area. The European Central Bank raised interest rates by a half-percentage-point on Thursday, but the single currency slipped in the wake of that decision.

Even though the ECB flagged the probability of another similar increase next month, the meeting and its aftermath were well within market expectations. It takes a major hawkish surprise to support a currency these days, and there was no such thing on offer.

That said, EUR/USD remains well supported by interest-rate prospects. It has risen consistently since September last year and is now back at highs not seen since April.

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