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A reading of 48.3 in May beat economists’ forecasts for a figure of 47.8. Even though any reading below 50.0 indicates a contraction, traders still reacted well to the news. Mario Draghi of the European Central Bank (ECB) stated that the region is ‘stabilising’, and certainly this update confirms that the eurozone is in better shape than analysts and investors had thought.
EUR/USD got off to a positive start this morning, but later strong manufacturing figures from the US led traders to sell the euro and buy the dollar. At 2pm, the US announced manufacturing PMI data for May. Analysts were expecting 52.0, and the reading in fact came in at 52.3. In recent months, whenever the US has released positive economic data, traders have bought the US dollar in the belief that the Federal Reserve would probably trim its stimulus package.
The Fed has stated that it will keep its monetary policy loose until unemployment reaches 6%, and on Friday the US will release its latest unemployment figures. If the jobless rate drops, we might see the euro fall further against the dollar.