Euro holds near three-month highs as Eurozone Flash PMIs beat expectations

The Euro is trading near a three-month high of 1.1710, close to 1.1700 against a weakened US Dollar. Eurozone business activity, as indicated by Flash HCOB Purchasing Managers' Index (PMI) data, has outperformed expectations. Manufacturing activity surged to 52.8 in July from 51.9 in June, while services activity remained steady at 51.7, surpassing the market forecast of a slight slowdown to 51.5.

In contrast, German PMI figures showed a mixed report, with services activity contracting to 48.5 from 49.8 in June, and manufacturing activity reaching a 51-month high of 54.1, exceeding expectations for a minor slowdown to 52.0. The US Dollar, however, remains subdued, following the US Treasury's announcement to increase buybacks of long-term government bonds, aiming to counteract a steep yield surge.

The 30-year Treasury yield reached a 19-year high of 5.33% earlier this week, as the national debt surpassed $40 trillion, prompting bondholders to demand higher returns. Experts at Scotiabank suggest that the Treasury is attempting to manage longer-term rates, which have risen due to doubts about the Federal Reserve's commitment to inflation control and concerns over the sustainability of US fiscal policy.

If higher yields fail to alleviate these worries, the US Dollar could face increased pressure. The Services PMI, a key indicator for the Eurozone services sector, reflects business activity changes compared to the previous month. As the services sector constitutes a significant portion of the Eurozone economy, the Services PMI is crucial for gauging overall economic conditions.

The data is gathered from surveys of senior executives at private-sector companies within the services industry. The index ranges from 0 to 100, where a value above 50 indicates expansion, positively affecting the Euro (EUR), while a value below 50 signals contraction, potentially harming the EUR. The Manufacturing PMI, another leading indicator, assesses business activity in the Eurozone manufacturing sector.

Derived from surveys of senior executives in private-sector manufacturing companies, the index varies between 0 and 100, with values above 50 suggesting expansion and below 50 indicating contraction. The Euro (EUR) is consolidating its weekly gains around 1.1700, following mixed PMI reports from Germany and the Eurozone. Investors are watching for early August PMI surveys from the US, while the persistent weakness of the US Dollar allows the EUR to maintain its upward trajectory.

Gold is experiencing modest gains near its highest level since early June, trading just above $4,550 as it benefits from a weaker US Dollar. Traders have reduced expectations of an immediate Federal Reserve rate hike after recent US inflation data indicated a cooling of price pressures. On September 9, the US Treasury adjusted its bond buyback operations, increasing the maximum support from $2 billion to at least $4 billion per operation, effective until November 4.