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Euro zone October factory growth near three-year high, PMI shows
Euro zone manufacturing activity accelerated at its fastest rate in nearly three years last month, supported by a buoyant performance from Germany, while inflationary pressures showed further signs of recovery, a survey found on Wednesday.
The findings will make welcome reading for policymakers at the European Central Bank, who have struggled to get growth and inflation up despite years of ultra-loose monetary policy.
Markit's final Purchasing Managers' Index (PMI) jumped to a 33-month high of 53.5 from September's 52.6, ahead of the preliminary flash reading of 53.3 and above the 50-mark that separates growth from contraction.
A sub-index measuring output, which feeds into a composite PMI due on Friday that is seen as a good overall growth indicator, climbed to 54.6 from 53.8, its highest level since April 2014.
The upturn came even though prices rose for the first time in over a year. An output price index was at a 16-month high of 50.8, up from 49.9 and its first time above 50 since August last year.
"Price pressures are coming up a bit. We would question whether that is strong enough to lead to a sustained increase in core inflation," said Stephen Brown at Capital Economics.
"It's positive, the ECB will be happy, but it's not going to be enough for it to hold off on pulling the trigger in terms of more loosening."
The ECB left policy unchanged last month but is likely to tweak its asset-purchase program and announce an extension by year-end, economists polled by Reuters said recently
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The euro added value against the US dollar for a second straight session on Wednesday and rose by 37 pips to 1.1094. EUR/USD was supported by the Fed's decision to leave its monetary policy unchanged yesterday and the positive data from the labor market in Germany. The pair remains above the moving averages and RSI continues to support the bulls. Support is placed at 1.1045 and 1.0980, while resistance is seen at 1.1120 and 1.1190.
Yesterday the EURUSD rallied but this time with a narrow range but closed near the high of the day, furthermore managed to close above previous day range, which suggests a strong bullish momentum.
The pair is trading above the 10-day moving average that should act as a dynamic support however the currency pair continues to trade below the 50 and 200-day moving averages that should act as dynamic resistances.
The key levels to watch are: Fibonacci retracement at 1.1181 (resistance), the 50-day moving average at 1.1113 (resistance), a daily resistance at 1.1097, the 10-day moving average at 1.0954 (support), a daily support at 1.0900 and October low at 1.0851.
EUR/USD consolidated it gains yesterday . The euro rose moderately to 1.1105, having traded within the extreme values 1.1125 and 1.1059. The pair remains above the moving average values, while RSI is loosing strength, alluding to the fluctuation of the bulls, whose next goal is the 1.1120. Support is placed at 1.1045 and 1.0980. Resistance is seen at 1.1120 and second at 1.1190.
Yesterday the EURUSD went back and forward without any clear direction but managed to close near the high of the day, although it closed within the previous day range, which suggests being on the bullish side of neutral.
The pair is trading above the 10-day moving average that should act as a dynamic support however the currency pair continues to trade below the 50 and 200-day moving averages that should act as dynamic resistances.
The key levels to watch are: Fibonacci retracement at 1.1181 (resistance), the 50-day moving average at 1.1110 (resistance), a daily resistance at 1.1097, the 10-day moving average at 1.0976 (support), a daily support at 1.0900 and October low at 1.0851.
Eurozone September PPI Rises 0.1%, Annual Rate Stubbornly Negative
Eurozone producer prices rose 0.1% in September following a 0.2% decline the previous month and the increase was slightly above consensus expectations of no change.
The annual decline in prices slowed to 1.5% from 1.9% previously and this was the lowest rate of decline seen in 2016.
Excluding energy prices, prices also rose 0.1% on the month with prices showing no change or rising marginally across all sectors.
Energy prices fell 4.7% over the year following a 5.7% decline previously, while there was a decline in intermediate goods prices of 1.4% from September 2015. Capital goods prices rose 0.4%, while durable consumer goods rose 0.9%.
The main focus of concern will be that producer prices excluding energy still declined 0.3% over the year, which suggests that underlying inflationary pressures are still very weak, even though there has been a gradual easing of deflation over the past six months from an annual decline of 1.2% seen for April. None of the major Eurozone economies recorded a positive inflation rate for producer prices over the year and overall prices are still around 7% lower than seen in 2013.
There is little chance of any significant inflation pressures from short-term trends in producer prices. The headline rate could, however, turn positive by early next year due to base effects. Any move into positive territory would ease the net drag on consumer price inflation.
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