Euro Bouyed by PMI Release

Due to this dollar bullish sentiment in the market, the EUR/USD slipped over 70 points in this week’s opening session.  However, in early Europe, a robust PMI manufacturing release in the Euro-Zone helped ease some of the downside pressure on the pair.   Euro-Zone PMI rose to a 5 and a half year high today of 56.1, well above the 50 boom/bust lever and much stronger the anticipated 55.0.  Nonetheless, as of 9:30 GMT, this overly Euro positive release had yet to elicit any strong buy interest in the single currency as bid on the EUR/USD settled down just above the day’s low at 1.2046 as the market’s focus remains on the US manufacturing release at 15:00 GMT.

European stocks hit new long-term peaks on Monday, helped by an Asian rally, and with early focus on French telecoms equipment maker Alcatel after it agreed to buy US rival Lucent Technologies.  In early trade, the FTSE Eurofirst 300 was up 0.6% to 1,378.13, with the Xetra Dax in Frankfurt pushing through the 6,000 level for the first time since July 2001, up 0.6% and the CAC 40 up 0.4% to 5,241.18.  Alcatel said on Sunday that it would buy US rival Lucent Technologies for $13.4bn in a bid to better compete with industry leader Cisco Systems.  Investors welcomed the deal and shares added 6% to €13.53.  Thales, the French defense electronics company, added 1.3% to €37.17.  Adidas, the German sportswear maker, gained 2% to €166.50 after Herbert Hainer, chief executive, said the company would exceed all targets with World Cup-related merchandise.  Additionally, Swiss engineering group ABB was up 2.4% to SFr16.85.

With the stronger than anticipated EZ PMI data raising expectations of a ECB rate hike in the near future, the yield on the benchmark Bund was up 2 basis points at 3.785% in opening trade with the bid down to 97.690.