Supported by weak fundamentals from the world's largest economy as well as some signs of improvement in the Eurozone, the single currency added 0.97% against the greenback and closed at 1.3285 on Friday. The manufacturing output across the 17-nation bloc that has the Euro in circulation surprisingly expanded this month for the first time in two years, suggesting the Eurozone is pulling out of recession. A survey conducted by London-based Markit Economics showed that a gauge of manufacturing activity soared to 50.1 up from 48.8 in June, outpacing analysts' forecasts for a 49.1 reading and finally indicating expansion in the sector. At the same time, a gauge of business morale from the Ifo Institute for Economic Research surged to 106.2 in July up from 105.9 in the preceding month, and outpacing analysts' expectations for a 106.1 reading. These figures are adding to hopes the Eurozone economy could recover from its longest-ever recession in the second quarter.
The only country, which has been performing well and according to the government's plans, is Japan. Under Shinzo Abe's leadership the country has finally started gaining momentum, and it was not a surprise as his Liberal Democratic Party has won a majority in the upper house. Abe's LDP party and his closest ally now have 135 out of 242 seats in the upper house in line with analysts' expectations, meaning an end of six years of parliamentary deadlock. At the same time a confident victory gives the hawkish Prime Minister a stronger mandate for his three-arrowed strategy, also known as "Abenomics", aimed at reviving economic growth from its 15-year bout of deflation and weak capital inflows. In addition to that, exports soared 7.4% in June, benefitting from weaker Yen. Finally, Japanese consumer prices rose in June at the highest annual pace in almost five years, adding to signs of an end to persistent deflation. The Ministry of Internal Affairs and Communications said on Friday that the core consumer prices, excluding fresh food, spiked 0.4%, overshooting analysts' expectations for a 0.3% reading. One of the most traded currency couples– USD/JPY fell 2.41% over week.
This week the main events are scheduled as always on Thursday– the BoE and ECB interest rate announcements as well as U.S. manufacturing data. Moreover, a day earlier, the U.S. GDP data will be unveiled, as well as the FOMC Statement is planned on Wednesday.