Even though EUR/USD was relatively volatile last week, it closed at 1.32856, with practically no change compared with the week's opening price. Nonetheless, there has been a series of upbeat economic data from the Eurozone, suggesting the region may finally start to recover from its longest-ever recession. First of all, the European Central Bank President Mario Draghi left the main refinancing rate unchanged at record low of 0.5% for a third consecutive month, after reducing it by 0.25% in May. The first glimmering of stabilization of the 17-nation economy also came last week, when Markit showed a gauge of manufacturing and services activity entered growth territory for the first time since January 2012. In further positive news for the region, the number of unemployed people fell by a seasonally adjusted 24,000 in June, totalling 19.266 million, although the decline was not big enough to budge the jobless rate from 12.1%. Moreover, the measure of economic confidence in the Eurozone climbed to the highest in 15 months in July. The Eurostat said that annual inflation in the 17-nation currency bloc was 1.6% in July, the same as in the preceding month, meeting analysts' expectations. It is the sixth month in a row when the rate has been below the ECB's 2% target level.
In Britain, Mark Carney followed Draghi's example and kept the target of its quantitative easing programme at 375 billion pounds, while benchmark interest rate stood at 0.5%, widely meeting analysts' projections. At the same time, Markit Economics and the Chartered Institute of Purchasing and Supply said that Britain's manufacturing growth quickens in July, adding to evidence the economy is recovering. A factory gauge jumped to 54.6 last month, up from 52.9 in June, the highest in 28 months. Furthermore, three of Britain's major economists, who took an optimistic view of the U.K. economic data, now believe the country has turned the corner and the pace of economic growth should pick up quickly from here.
A first half of the week was full of optimistic data from the U.S., which showed that that companies across the country are now more optimistic and showing willingness to increase hiring and produce more goods. A report from the Institute for Supply Management showed a gauge of factory activity jumped to 55.4 in July, hitting the highest in two years, supported by strong demand. As always on Thursday the Labor Department said that the number of American filing new claims for jobless benefits fell surprisingly last week, touching a 5-1/2 year low, pointing at steadily improving labour market. The number of initial unemployment benefits fell 19,000 to a seasonally adjusted 326,000 in the week ending July 27. The world's largest economy expanded at an annualized pace of 1.7% in the April-June period, slower than a 1.8% growth in the previous quarter, however, beating analysts' expectations of a 1.1% reading. On Friday, however, figures showed that payrolls increased less than expected, giving the Fed more room to keep the quantitative easing at high velocity for longer than predicted.
This week will be full of reports from Switzerland, while on Tuesday, the RBA will decide on whether to introduce any additional stimulus measures to boost growth or stay pat on its monetary policy. During the second part of the week, Japanese policymakers will prove the world's third largest economy is on the path of sustain recovery.