The survey shows that continued growth is expected in China, at 50.9 versus 50.1 in August. The official PMI for manufacturing and services data in the eurozone is expected to show growth in the region for a sixth month, which brings us to the focus on the euro. The much anticipated election in Germany has come to a close with Angela Merkel sweeping into power for a third term.
The election has gripped international interest as the eurozone is coming out of a recession and continuity is what the markets favour. This was seen in the euro breaking the 1.34 resistance level. While Germany remains the bright spot, pulling the eurozone out of the recession, and while business confidence remains elevated, it is a very different picture in the periphery countries.
Greece is still in the throngs of trouble, and in need of more aid. Greece is currently drawing on $325 billion in financial aid, paid mostly by the Germans. A new round of meetings in Athens between Greek officials, the European Commission, the ECB and the IMF begins to discuss a further rescue package. Greece has been in six years of recession, with the highest unemployment rate of 28%.
The euro’s interest has been fuelled by the weakness in the US dollar. Given that the market is now talking about an October taper after Bullard’s comments, the dollar should bounce off the bottom, which will put some pressure on the euro. Nevertheless, the bulls are evident in the euro and further consolidation is expected before a possible retest of the high in 1.3711 on 1 February.