The Euro gained ground against both the Canadian Dollar and the US Dollar following the release of improved Purchasing Managers’ Index (PMI) data from the Eurozone and Germany, as well as a supportive external environment marked by falling oil prices and hopes for a diplomatic breakthrough in the Middle East [1][2]. The HCOB Eurozone Composite PMI rebounded into expansion territory in July, rising to 52.0 from June's neutral 50.0, marking the first increase in regional business activity since March and the sharpest growth rate in eight months [1]. The Eurozone Services PMI was revised higher to 51.7 from the previous 51.6, confirming a return to expansion after three months of contraction and a significant improvement from June’s 49.4 [1][2].
Germany's Composite PMI also returned to growth for the first time since March, rising to 51.3 in July from 49.5 in June [1]. The German Services PMI was revised up to 49.8 from previous estimates of 49.6, showing an improvement from June’s 48.6, though it remains just below the neutral 50.0 threshold [1][2]. France’s Services PMI, however, was revised down to 49.6 from the 49.8 preliminary estimate, but still improved from June’s 46.8 [2]. Italy and Spain’s Services PMIs were reported at 52.5 and 58.3, respectively, both beating consensus expectations and indicating robust expansion [1][2].
The EUR/CAD cross traded around 1.6240 during European hours on Wednesday, continuing its winning streak since July 24, as the Canadian Dollar struggled amid falling energy markets and oil prices near three-week lows [1]. West Texas Intermediate (WTI) oil rebounded slightly to around $75.40 per barrel after sharp losses of nearly 13% over the previous two sessions [1]. Crude oil prices received a modest boost after Yemen's Houthis claimed responsibility for an attack on a Saudi vessel in the Red Sea, but optimism about a potential deal to reopen the Strait of Hormuz, with US, Iran, and Oman reportedly nearing an interim agreement, contributed to a risk-on mood [1].
For the EUR/USD pair, the Euro consolidated around 1.1530, just below seven-week highs at 1.1558, supported by the upward revision of the Eurozone’s services activity data and lower oil prices, which are seen as beneficial for the Eurozone’s crude-importing economies [2]. The US Dollar struggled amid a risk-on mood and fading expectations for a Federal Reserve rate hike in September, as US job openings declined more than forecast and factory orders contracted [2]. Bets for a Fed rate hike in September eased to 58% from 57% on Tuesday, according to CME Group’s FedWatch tool [2].
Analysts at Rabobank highlighted the divergence within the Eurozone, noting the resilience in Italy and Spain compared to ongoing weakness in France and Germany, and cautioned that geopolitical tensions in the Middle East may have exerted additional downward pressure on sentiment during the July survey period [1].
CONCLUSION
The Euro's recent gains are underpinned by improved Eurozone and German PMI data, a supportive risk environment, and falling oil prices. While expansion in services activity is a positive sign, analysts caution that geopolitical risks and uneven momentum across Eurozone economies could temper optimism. The market impact is moderate, with the Euro benefiting from both domestic data and external factors.