THE TAKEAWAY: Euro-zone manufacturing PMI for January revised higher to 47.9 -> PMI’s confirm ECB optimism -> Euro continues to set new highs

Euro-zone manufacturing activity continued to decline for the eighteenth straight month according to Markit’s PMI, but the rate of decline was the slowest in 11-monhts. The Purchasing Managers’ Index for manufacturing was revised higher to 47.9 from 47.5 in the final estimate for January. The German PMI for manufacturing saw a full point revision in the final January estimate of 49.8. A PMI below 50.0 indicates a decline in sector activity.

As Germany’s PMI set a new high and the manufacturing sector saw a return to growth in output, France’s PMI declined to a 4-month low of 42.9. Manufacturing output across the Euro-zone contracted for the eleventh straight month in January, according to Markit. Ireland and the Netherlands also saw increases in manufacturing production. Euro-zone manufacturing employment fell for the twelfth straight month and at a quicker pace.

The improved PMI’s seem to confirm the ECB prediction for the Euro-zone to see a recovery later in 2013. Markit Chief Economist Chris Williamson said, “While the industrial sector looks likely to have acted as a drag on the Euro-zone economy in the final quarter of last year, the PMI provides hope that the first quarter could mark the start of a turnaround.” Signs of economic growth would be Euro positive.

The Euro rose about 40 points against the US Dollar to 1.3650 as the countries’ PMI’s were being released. EUR/USD continued to set new 14-month highs in today’s session, following the rally over the past four days in Forex trading. Resistance may now be provided by the next high around 1.3850, and support could be provided by a broken resistance around 1.3500.

EURUSD Daily: February 1, 2013

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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