Eurozone PMI Key Points:
- The latest Eurozone composite output index was at 49.3 (November: 47.8). 5-month max.
- Final Eurozone services business activity index at 49.8 (November: 48.5). 4-month maximum.
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The seasonally adjusted S&P Global Eurozone PMI composite output index was sub-50 for the sixth consecutive month at 49.3, up from 47.8 in November. The data showed the slowest decline since activity levels began to decline last July. In each of the last two surveys, the decline has now softened. Eurozone services PMI business activity index rose to 49.8 in December, down from 48.5 in November, showing a slight decline in the performance of the euro area services sector. Overall, this is the smoothest decline in activity since last August.
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Outstanding business volumes fell for the second month in a row as a slowdown in new business allowed companies to focus on orders until completion. Further expansion of employment increased the supply of wealth. The job creation rate, however, was a fraction stronger than the previous 20-month low. Business confidence showed signs of improvement, but inflation eased to 11- and 4-month lows, but increases in input and output prices remained modestly offsetting.
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How to trade EUR/USD
The euro area has shown resilience through the end of 2022, with a number of positive indicators that look set to continue into 2023. Yesterday German inflation data came in with unemployment at -0.8% Vs -0.3% forecast. So are velocity estimates. France’s primary inflation data released earlier today beat estimates of 0.4% MoM by -0.1%, further strengthening the narrative. The improvement in recent data coupled with a slight positive tone to start the year could support the Euro in the near term.
Euro/Dollar 1H chart
Source: TradingView, prepared by Zain Vauda
Initial reaction to the data saw EURUSD drop 10 pips before moving higher once again.
We remain in a rising wedge pattern as yesterday’s bearish low failed to break on the daily time frame. As of this morning, we had some 60-pips highs in EURUSD for the day.
IG Customer Sentiment: Bearish
The IG Client Sentiment Data (IGCS) shows that retail traders are currently short on EUR/USD, with 58% of traders holding short positions. At DailyFX we typically take a contrarian view of public sentiment, and traders being short suggests that the EUR/USD price may continue to rise.
— Written by Zain Vauda DailyFX.com
Find and follow Zain on Twitter: @zvawda