Eurozone PMI's show Europe's Economic Expansion Continues Apace

“We slightly favour EUR/USD climbing back to the 1.1820 area over the next 24 hours” - ING Group.

A slew of Purchasing Manager Index data from IHS Markit confirms the Eurozone economy continues to grow and add jobs at a healthy pace, further underlining the fundamental foundations of the Euro's 2017 rally.

IHS Markit release both the services and composite PMI numbers which show Germany and Spain lead the Eurozone services sector with a resilient performance during September, while the overall Eurozone service PMI edged higher.

The Eurozone’s largest economy printed a steady number of 55.6, unchanged from the previous month, while Spain’s services index rose faster than economists had been predicting. Both French and Italian indices fell further than was expected.

Putting the manufacturing and services industries together to gives us the Eurozone composite service PMI. The composite PMI edged higher, up from 55.6 to 55.8, slightly ahead of the consensus forecast.

IHS Markit report that September saw rates of output expansion accelerate in both the manufacturing and service sectors, although the former continued to register the superior performance overall.

The upturn in the eurozone economy continued to test capacity, leading to the sharpest increase in backlogs of work since February 2011. Companies raised employment to one of the greatest extents over the past decade, with job creation registered across Germany, France, Italy, Spain and Ireland.

Wednesday’s Eurozone PMIs come ahead of a speech from European Central Bank president Mario Draghi, who will address an audience at the inauguration of the ECB’s visitor centre in Frankfurt.

"Manufacturing has grown at its fastest rate for over six years and the services PMI has also come in above expectations. Although the ECB won’t be taking anything for granted, optimism is high and the recent positive data will surely lead to the central bank winding down its stimulus programme in the near future,” says Dennis de Jong, managing director at UFX.com.

The data also come less than a month out from an eagerly anticipated announcement of an ECB move to wind down its quantitative easing programme.

Most forecasters expect Draghi to announce a tapering period running between six and nine months long, with the announcement coming in October and the taper commencing in January.

Expectations of an ECB retreat from its stimulus program have gained momentum synchronously with a firming Eurozone economic recovery which should ensure the Euro stays firm.

“EUR/USD has found a little support at 1.1700 as we thought in our G10 FX Week Ahead and we’d favour a little consolidation near term,” says Chris Turner, head of foreign exchange strategy at ING Group. “We slightly favour EUR/USD climbing back to the 1.1820 area over the next 24 hours."

The Euro traded higher against both the Pound and the Dollar Wednesday, with the Euro-to-Pound rate quoted up 0.03% at 0.8874 while the Euro-to-Dollar rate was up 0.12% at 1.1763. The Pound-to-Euro rate was down 0.05% at 1.1268.