Euro Cooled Gains following PMI Reading - 23.8.2012

The single currency reached a 7-week high against the greenback in the morning today, touching 1.2571, but the rally was limited after Markit Economics reported that economic activity in the euro area’s services and manufacturing industries contracted in August. The composite index however rose slightly from 46.5 in July to 46.6 currently, but is still well below 50. At the same time Germany reported its growth numbers for the second quarter. The biggest European economy expanded by 0.3% on the previous quarter (down from +0.5% in the first quarter) and by 0.5% on the previous year. The expansion, according to the Federal Statistics Office, was mainly driven by exports and household spending. The euro is currently trading around 1.2550 versus the US dollar and is flat today against the Japanese yen at 98.31-98.80.