Samer Hasn Market Analyst and part of the Research Team at XS.com

The euro continued to decline significantly today at the beginning of the new year, by 0.3%, reaching the level of 1.10002 against the US dollar in the largest decline, which represents the lowest level since the 25th of last December.

Pressure on the euro came from a rebound in the dollar, despite seemingly positive manufacturing PMI figures and rising Eurozone bond yields.

Today, we witnessed a number of final readings for the S&P Global manufacturing PMI for last December. While these figures indicated a continued contraction in the region’s economy at the end of last year. This contraction was, for the most counties, slightly less than expected.

In Germany, manufacturing activities continue to trend towards reversing the ongoing contraction. The manufacturing PMI recorded a reading of 43.3, which was higher than expectations of 43.1, which represents the highest reading since April of last year.

This came as the decline in factory outputs and employment accelerated. However, the decline in new orders was at the slowest pace as business expectations rebounded for the first time since April, according to the S&P Global report.

Also, according to the report, companies are still facing many negative factors that negatively affect demand, whether from uncertainty about the economy and geopolitical concerns or from weakness in the construction sector.

However, manufacturers have continued to reduce factory gate prices in light of intense competition and falling input prices.

As for France, manufacturing activities continued to contract, this time at the fastest pace since May 2020. However, this contraction was slightly less than expected, with a reading of 42.1 versus expectations of 42.0.

This contraction in French manufacturing activities came as new orders, purchasing activities and job losses continued to decline.

Italy also recorded a smaller than expected contraction in manufacturing with a reading of 45.3, which was higher than expectations of 44.4. In Spain, activities contracted faster than expected with a reading of 46.2 versus expectations of 47.

As for the Eurozone as a whole, manufacturing activities contracted at the slowest pace since May of last year. The index recorded a reading of 44.4, which was slightly higher than expectations of 44.2.

While the report indicated that the worst of job losses has passed, with the contraction in new orders and purchasing activities declining and business confidence rising to the highest level in eight months. The decline in the level of production and factory outputs also accelerated last December with weak demand.

In bond markets, the rise in Eurozone bond yields could not support the euro in light of further rises in US bond yields.

The yield on ten-year German bonds rose to 2.110% before the announcement of the new data, which represents the highest level since mid-last December. This is almost the case with various bond yields in the region as well.

US Treasury bond yields continued the extended recovery since the last days of last year. The yield on ten-year bonds reached 3.948%, which is the highest since last December 19.