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Euro dips despite positive data

By Michael Cooper December 16th, 2016

The euro (EUR) continued to weaken against the US dollar (USD) progressively yesterday, hitting its lowest level for 14 years. A surprising outcome after both French and German flash manufacturing Purchasing Managers Index (PMI) data indicated industry expansion, weighing in at 53.5 and 55.5 respectfully. Flash manufacturing PMI is a diffusion index based on surveyed purchasing managers in the manufacturing industries. Both countries outperformed their forecasted PMI totals, thus offering the possibility for some support for euro performance going forward.

Flash manufacturing PMI put to one side, the European Central Bank’s (ECB) long-term refinancing operations have been announced – asserting loans to be made with a variable interest rate and a four year term. What does this mean? It refers to the value of new long-term loans the ECB will issue to banks and how liquidity will be provided to banks – typically leading to lower long-term interest rates with the aim of encouraging growth.

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