Euro Steady On Improved Economic Views, Euro Zone Pmis Awaited
The euro was steady on Thursday after evidence of strength in China improved the outlook for the global economy, with the market looking next to European indicators to provide the currency with a further boost.
The euro traded little changed at $1.1293 , having eked out a gain of 0.1 percent the previous day.
The single currency has steadily recovered from a low of $1.1183 plumbed at the start of April.
The euro was lifted after data on Wednesday showed China’s economy grew at a steady 6.4 percent pace in the first quarter, defying expectations for a further slowdown, as industrial production surged and consumer demand showed signs of improvement.
“A recovering Chinese economy is also good news for the German economy, and thus positive for the euro,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
“The ongoing surge in bund yields amid ‘risk on’ is a key factor supporting the euro,” he said.
The 10-year German bund yield rose to a one-month high of 0.10 percent overnight, in a sharp rebound from a 2-1/2-year low of minus 0.094 percent at the end of March.
Bund yields had sunk in March as concerns about slowing global growth gripped the broader market. Investors are now watching Chinese and European economic data for signs that the global economy is performing better than initially thought.
“Data from China cleared the way for the euro, which needs follow through support in the form of strong euro zone indicators,” Ishikawa at IG Securities said.
The Purchasing Managers’ Indexes (PMIs) for the manufacturing and service sectors in Europe, due later on Thursday, will provide the next indication of strength for the European economy.
“It is hard to imagine the euro zone economy getting any worse following their recent weakness and such views are helping participants slowly embrace the euro,” said Daisuke Karakama, chief market economist at Mizuho Bank in Tokyo.
“The euro zone PMIs due today will attract a lot of attention,” he said.
The dollar index against a basket of six major currencies was nearly flat at 97.051 after dipping 0.05 percent the previous day.
The U.S. currency inched down 0.1 percent to 111.955 yen after briefly touching a four-month peak of 112.17 on Wednesday amid a bounce in U.S. Treasury yields to a one-month high.
Commodity-linked currencies sagged after a surge in crude oil prices ran out of steam.
The Canadian dollar stood at C$1.3351 per dollar, having pulled back from a one-month high of C$1.3275 brushed on Wednesday.
The Australian dollar was flat at $0.7179.
The currency briefly rose to $0.7200 as Australian job growth in March surpassed forecasts.
But the Aussie was unable to sustain the rise as Thursday’s data set was not entirely rosy, showing that the country’s unemployment rate ticked up in March.
The Reserve Bank of Austria earlier this year opened the door for a possible interest rate cut, and labor conditions are being watched for potential impact on monetary policy.