The Eurozone’s recovery looks set to continue following a string of economic releases this morning. Manufacturing PMI figures hit their highest level since April 2011 whilst unemployment figures hit their lowest levels since 2009. UK Manufacturing PMI figures came in worse than analysts expected, due to rising import prices as a result of the depreciated Pound.
Up to now the weaker Pound has helped drive UK exports but as higher inflation begins to creep in, importing raw materials will become incrementally more expensive.
The Euro has regained momentum against its Sterling counterpart with GBP/EUR down half a cent since trade opening.
Huge differences across member states
The data was received well by Euro investors however there remains huge variations across member states.
Czech Republic (3.4%), Germany (3.9%) and Malta (4.1%) are amongst the member states with the lowest unemployment rates, in stark contrast to Greece which has an unemployment rate over 23%. Determining future monetary guidance remains a difficult task for Mario Draghi. On the one side Germany’s strong economy could benefit from an interest rate hike but this would have a detrimental affect on economies such as Greece and Italy.
Eurozone rate hike on the cards?
The European Central Bank (ECB) is warning governments to get ready for higher interest rates. ECB member Benoit Coeure told a Finance conference this morning that an adjustment to monetary policy is looming.
I hope that euro zone governments know that interest rates will not stay at current levels.
– Benoit Coeure, ECB member
Investors will now be looking ahead to Draghi’s next monetary policy meeting on Thursday for clues as to when the bank may look to raise interest rates.
In light of recent data, and specifically higher inflation we could see a rate hike in the coming months.
The ECB last changed interest rates to record lows in March 2016.