2 May 2001, 16:04 Forex: Euro stronger in midday London trade despite weak euro zone PMI data
LONDON (AFX) - The euro was slightly stronger in midday trade
leaving investors puzzled, especially in light of this morning's weaker
than expected euro zone purchasing managers index which indicates a
contraction in the euro zone economy, dealers said.
The euro zone PMI index for the manufacturing sector fell to a
seasonally adjusted 49.3 in April from 51.2 in March.
"There are always plenty of believers in the euro," Paul
Bednarczyk, a forex specialist at 4CAST, said.
"People are disappointed with the numbers but will still give the
euro a chance," he added.
Daragh Maher, senior economist at ING Barings said, "The euro has
not had a great time recently."
He added that European Central Bank president Wim Duisenberg "said
inflation risks are more balanced but the signals on growth are still
hawkish -- they're not afraid of the economy falling into the abyss".
Maher said, "On the inflation side, it is status quo, their views
have not changed. There is no evidence in light of their comments
today, that this morning's PMI data has caused them to take a more
doveish view.
"Euro's strength could be due to short-covering perhaps. Maybe the
market's getting a sniff that the U.S. labour report on Friday will be
worse than expected," he added.
In the UK, sterling was weaker on profit-taking after yesterday's
rise, dealers said.
"There was a bizarre bounce yesterday afternoon and now we are back
to the level seen before this," Maher at ING Barings said.
"UK PMI was weaker than expected leading to expectations of a rate
cut which is negative for sterling," he added.
The UK construction sector continued to expand in April, according
to the latest survey of the sector from the Chartered Institute of
Purchasing and Supply.
The CIPS reported that its headline activity index stood at 57.3 in
April, for the twenty seventh straight month of expansion. The index
was at 56.9 in February.
"Sterling had strength going into CBI but came off on the back of
it, which is surprising," Adam Chester, chief economist at Halifax,
said.
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