THE TAKEAWAY: Euro-zone composite output index revised higher to 48.6 -> Higher PMI's confirm ECB predictions for a recovery -> Euro rallies above 1.35
The Euro-zone composite PMI index reached the highest level in 10-months in January, further supporting the ECB's prediction that a recovery will take place in 2013. Markit's composite output index was revised higher to 48.6 from a previous 48.2 estimate. The Purchasing Managers' Index for services was revised higher to 48.6 from 48.3.
Both the PMI's for manufacturing and services in the Euro-zone saw the highest result in January since March 2012. Both sectors reported a record slowdown in declines in new orders, according to Markit. German composite output hit a 19-month high of 54.4, while French output hit a 46-month low of 42.7. Job cuts continued in January according to Markit, the rate of job losses was the fastest in over three years.
The Euro-zone entered a technical recession in the second and third quarter of 2012, but the PMI's support the ECB's prediction of a recovery later in 2013. Markit Chief Economist Chris Williamson said, "The Euro-zone is showing clear signs of healing, with the downturn easing sharply in January, and the region moving closer to stabilization in the first quarter."
The Euro rose over 70 points against the US Dollar in Forex markets as the countries' PMI's were being released. EUR/USD may now see resistance by the recent 14-month high set at 1.3710, and the pair may see support by a broken resistance line around 1.3500.
EURUSDDaily: February 5, 2013
Chart created by Benjamin Spier using Marketscope 2.0
-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to firstname.lastname@example.org .