2020.12.1609:52:00UTC+00Euro Spikes Up As German Business Activity Accelerates

The euro gained ground against its major counterparts during the European session on Wednesday, as better than expected PMI data from Germany and France signaled that economic recovery is gathering pace.

Survey results from IHS Markit showed that Germany's private sector expanded again in December with the strength in manufacturing continuing to offset service sector weakness.

The flash composite output index climbed unexpectedly to 52.5 from 51.7 in November. The reading was forecast to fall to 50.4.

The services Purchasing Managers' Index came in at 47.7, up from 46.0 a month ago and above the consensus forecast of 44.0.

The manufacturing PMI advanced to 58.6 from 57.8 in November. The score was seen at 56.4.

Separate data showed that the French private sector logged a softer decline in December despite strict Covid-19 lockdown restrictions.

The flash composite output index advanced more-than-expected to 49.6 from 40.6 in November. The expected score was 42.9.

The services Purchasing Managers' Index moved up to 49.2 from 38.8 a month ago. The reading was also well above economists' forecast of 40.0.

The manufacturing PMI came in at 51.1 versus 49.6 in the prior month and 50.1 expected by economists.

Growing hopes of a Brexit trade deal, optimism over vaccination rollouts and potential U.S. government stimulus also underpinned sentiment.

European Commission President Ursula von der Leyen said that there had been progress in talks over a post-Brexit trade agreement with the U.K. and the next few days would be "critical."

The euro rebounded to 0.9056 against the pound, from a 6-day low of 0.9007 seen at 3:20 am ET. Next immediate resistance for the euro is eyed around the 0.92 level.

Data from the Office for National Statistics showed that U..K. consumer price inflation slowed to a three-month low in November.

Inflation weakened to 0.3 percent from 0.7 percent in October. The rate was well below the economists' forecast of 0.6 percent.

The euro jumped to 1.2212 against the greenback, a level unseen since April 2018. Should the euro rises further, 1.24 is likely seen as its next resistance level.

The European currency firmed to a 2-day high of 1.0790 against the franc, after dropping to 1.0760 at 5:00 pm ET. The euro is poised to find resistance around the 1.10 level.

The euro rose to 126.19 against the yen, after touching 125.71, which was its lowest level since December 1. On the upside, 127.5 is likely seen as its next resistance level.

Data from the Ministry of Finance showed that Japan posted a merchandise trade surplus of 366.8 billion yen in November.

That was well shy of expectations for a surplus of 529.8 billion yen and down sharply from 872.9 billion yen in October.

Reversing from its prior 2-day lows of 1.7103 against the kiwi and 1.6062 against the aussie, the euro edged up to 1.7156 and 1.6121, respectively. The next possible resistance for the euro is seen around 1.74 against the kiwi and 1.66 against the aussie.

The single currency rallied to 1.5536 against the loonie, setting a 2-day high. The pair had closed yesterday's trading session at 1.5428. The euro is seen finding resistance around the 1.58 level.

Looking ahead, Canada CPI and U.S. retail sales for November, as well as business inventories data for October and NAHB housing market index for December will be released in the New York session.

At 2:00 pm ET, the Fed announces its decision on interest rate. Economists widely expect the federal funds rate to be kept at 0 - 0.25 percent.