Euro Posted Gains, ECB Turned Dovish in the Policy Meeting
The euro rose to its highest level against the US dollar since October 2015. The strength in the euro was powered by weakness in the US Dollar Index.
The US Dollar Index measures the strength of the dollar against other major currencies. It continued its downward trajectory on February 4, 2016.
The pound-US dollar currency pair is directly related to the pound. It had a volatile day of trading on February 4, 2016. The pair was close to a one-month high.
In January, service sector activity in the United Kingdom increased at a stronger pace. The growth was supported by the strong rise in new orders.
Italy’s service sector PMI fell 1.7 points in January to 53.6 compared to 55.3 in December. The increase in the headline index was attributed to an increase in new incoming work but at a slower pace.
France’s services business activity index increased by 0.5 points in January to 50.3. The composite PMI output index rose to 50.2 in January against 50.1 in December 2015.
Germany’s services business activity index declined by 1.0 points in January to 55.0. The composite PMI output index fell to 54.5 in January against 55.5 in December 2015.
The service sector grew at a slow rate in the Eurozone in January. The Eurozone services business activity index stood at 53.6 in January, compared to 54.2 in December 2015.
The US services business activity index declined by 1.1 points in January 2016 to 53.2. The composite PMI output index fell to 53.2 in January against 54.0 in December 2015.
The US Dollar Index, which measures the strength of the US dollar against the other major currencies, fell below 97 on February 3. It hit a low of 96.9 before ending the day at 97.3.
The pound to US dollar currency pair, which has been bearish since the beginning of the year, has been showing positive movement, rising 1.2% on February 3, 2016.
The weakening lira has been a cause of concern for Basci, as higher prices create the risk of further depreciation of the lira versus the US dollar.
The Turkish lira recovered its losses on February 2, 2016, after falling against the US dollar in the previous session. The lira weakened with reports that a Russian jet had intruded Turkish airspace.
The Australian dollar ended on a lower note against the US dollar on February 2, 2016, after gaining early in the session as the Reserve Bank of Australia decided to keep interest rates unchanged at 2.0%.
The RBI governor said that the current value of the rupee did not warrant concerns from the central bank, as it is not targeting a specific level for the dollar-rupee currency pair.
The pound-dollar currency pair, which is directly related to the pound, had a roller coaster ride on February 2, 2016.
India accounts for about 2.7% of the world’s gross domestic product (or GDP), and manufacturing activity accounts for ~17% of India’s GDP.
China accounts for around 9.1% of global gross domestic product (or GDP), and manufacturing activity contributes about 31% to China’s GDP.
Russia accounts for about 1.7% of world’s GDP (gross domestic product). Moreover, manufacturing activity accounts for about 16% of Russia’s GDP.
Brazil accounts for about 2.1% of the world’s gross domestic product (or GDP), and manufacturing activity accounts for around 11% of the country’s GDP.