By: Ben Myers
The much maligned Euro started 2012 where it left off in 2011, finding itself under increased pressure following today’s announcement that activity in the Eurozone manufacturing sector dropped for the 5th consecutive month. The EUR finished the last week of 2011 noticeably lower against the USD, hitting 1.2857, the lowest since mid-September 2010 before ending the final day of trading at 1.2959.
Although December’s manufacturing PMI was slightly up from November’s 28-month low of 46.4, the figure of 46.9 signifies the weakest growth in a quarter for the Eurozone since mid 2009. Despite the rate of decline easing fractionally in December, no member of the Eurozone recorded an increase in manufacturing activity with Italy, Greece and Spain showing significant contractions.
PMI – What it Means, How it Works
The Purchasing Managers Index provides a useful picture of economic activity well before official data is published and includes survey results on new orders, employment levels and raw material prices. Any score under 50 constitutes a contraction and to put the Eurozone figures into perspective; Japan’s PMI edged above the 50 mark in December, whilst China’s PMI increased to 48.7, representing a slower contraction since November.
The release of the PMI figures put more pressure on an already beleaguered Euro. Although employment increased in Germany and France, the employment figures fell in the other 15 Eurozone members and increased more investor fears of recession returning to Europe. The EUR/USD fell on the news and ahead of US markets opening the already-weakened EUR found itself down 0.15% against the Greenback, trading at $1.29360 (13.46GMT). When the US markets open later today, more pressure is expected on the EUR as PMI data is published in the US and the Federal Reserve to release the minutes of the last policy-setting meeting.
