Eurozone Business Activity Surges Back to Growth
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Eurozone Business Activity Surges Back to Growth

The S&P Global flash Composite Purchasing Managers' Index (PMI), a vital indicator of overall economic health, soared to 50.2 this month from 49.3 in December. January marked the first time the index has been above the 50 threshold, which separates growth from contraction, since June, and it exceeded the median Reuters poll forecast of 49.8.

Optimism Abounds

A mild winter, plummeting gas prices, and recent positive economic data have led to upgrades in some quarterly growth forecasts in a Reuters poll published on Monday, although a technical recession is still predicted. Reflecting a growing sense of optimism, companies are ramping up their headcount at a brisker pace this month. The employment index soared to a three-month high of 52.5 from 51.9 in December. The PMI covering the bloc's dominant services index also exceeded expectations, reaching a six-month high of 50.7. It was at 49.8 in December, and the Reuters poll forecasted 50.2.

New Business Index Approaches Breakeven Mark

Despite consumers facing heavy bills, demand only waned slightly. The new business index was just below the breakeven mark at 49.8, up from 48.4. Although the region is still not out of the woods, as demand continues to decline, the rate of decline has slowed.

The EUR/USD is holding steady below 1.0900, maintaining mild gains on mixed German and Eurozone PMI data. The pair remains supported amidst a broad US dollar weakness and sluggish Treasury yields ahead of US PMI data.

Economic Data Boosts Interest Rate Hike Prospects for GBP and JPY

The dollar dipped to a new nine-month low in early trade in Europe on Tuesday as economic data from Japan and the U.K. strengthened the case for more interest rate hikes. The dollar index, which tracks the greenback against a basket of advanced economy currencies, dropped 0.4% to 101.513, reversing a modest uptick overnight as stronger-than-expected Japanese inflation numbers added pressure on the Bank of Japan to abandon its policy of yield curve control.

PMI Data Takes Center Stage

The rest of the economic calendar for the day is likely to be dominated by S&P Global's purchasing managers indices across Europe, the primary U.S. Purchasing Managers Index in the manufacturing sector and services and 2-Year Note Auction. As the Eurozone experiences an economic resurgence, the world watches with eager anticipation to see what the future holds.