The eurodollar rallied against the Canadian dollar yesterday following overwhelmingly positive retail sales data for March.
The release of bland Canadian manufacturing PMI data in the US session enabled the eurodollar to cement its gains against the Loonie. In the last 24 hours, the EUR/CAD pair rallied from a low of 1.4760 to a high of 1.4840.
According to German statistical organization Destatis, the country’s retail sales increased 7.7% m-o-m in March, following a growth of 1.2% in the earlier month and more significant than the 2.9% rise anticipated by economists.
It was the second robust month-over-month rise in turnover, following the imposition of prohibitions in March to contain the spread of COVID-19 in the country.
On a y-o-y basis, Germany’s retail sales grew 11% in March 2021. Furthermore, in March 2021, the retail sales grew 4.4%, compared with the pre-pandemic February 2020 level.
According to IHS Markit, Spain’s manufacturing PMI (purchasing managers’ index) increased to 57.70 in April, from 56.90 in the earlier month, but missed the 59.10 reading anticipated by economists. It is the highest recorded reading since December 1999.
Fresh orders recorded a significant rise in April, but slightly lower than the high recorded in March. Demand increased both at home and overseas. Fresh export orders reached the highest level since February 2018 against the backdrop of an increase in sales throughout the world.
As the order books strengthened, companies boosted production volumes. Firms also employed additional staff to manage an increase in workloads, and employment increased to the highest level since the beginning of 2018.
Global product shortages and increasing demand had a recognizable effect on prices over the month, with input costs increasing to the highest level since March 2011.
Goods, which recorded a price increase, include metals, chemicals, plastics, and fuel, with companies signaling an interest to pass the higher costs to end clients, if possible.
Commenting on the data, Paul Smith, Economics Director at IHS Markit, said: “With demand strengthening and expected to continue to do so in the months ahead as economies reopen further, any challenges for the sector are predominately stemming from the supply-side […].”
According to IHS Markit, the Eurozone final manufacturing PMI edged upwards to 62.90 in April, from 62.50 in March, reflecting the highest recorded level since the organization started publishing data in June 1997. Notably, for the 10th consecutive month, the index recorded a reading above 50.
Economists had anticipated no change in the preliminary reading of 63.30. Overall, the operating conditions improved at a pace that eclipsed the earlier record in March.
Both investment and intermediate goods recorded significant gains, with broad-based growth in all market groups. Furthermore, investment goods posted the strongest ever growth.
Both aggregate manufacturing output and fresh orders stood close to March poll records as companies posted an increase in market confidence.
Backlogs of work increased again at a record rate and have now increased for nine successive months. Companies hired staff for the third month in a row. The net gain was also the best since February 2018, with all the European countries posting higher employment figures.
As per the latest data, manufacturers’ optimism hit its highest level in almost nine years in hopes of a robust increase in economic activity on completing the vaccination program.
Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit, said: “Eurozone manufacturing is booming, with a new PMI record set for a second month running in April. [….] The big uncertainty is how long these upward price pressures will persist for, and the extent to which these higher charges for goods and services will feed through to consumers.”
In the US session, data provided by IHS Markit indicated that Canada’s manufacturing PMI (purchasing managers’ index) declined to 57.20 in April, from 58.50 in the prior month.
The reported figure signals the third robust growth in operating conditions since the organization started posting survey results in October 2010.
The country’s manufacturers posted another robust increase in their production volumes, even though the pace of growth slowed down. Fresh orders increased sharply, although at a slightly milder rate than recorded in the earlier survey period.
In April, for the tenth successive month, goods producers in Canada hired employees. The pace of job creation slowed down from March but remained strong.
Against the backdrop of raw material shortages, average lead times increased in April. Due to shortages in raw material and supply-chain issues, firms recorded a rise in expenses, with input price inflation recording a 32-month high level. Notably, manufacturers were optimistic of a further increase in production in the forthcoming 12 months against the backdrop of rising investments and an increase in demand from clients.
The robust German retail sales data is expected to keep the EUR/CAD pair range-bound with a slight bullish bias.
Technically, the EUR/CAD pair is rising after testing the support at 1.4800. The next resistance is anticipated only near 1.4940. Additionally, the stochastics oscillator is ascending towards the bullish zone. Therefore, we are anticipating the currency pair to remain in an uptrend in the short term.
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