Euro positioning continues to unwind

Euro traders sent the single currency lower against most forex counterparts through the day of trade, as year-end squaring and a broader carry trade unwind doomed the EUR to further declines. Economic data for the Euro Zone was relatively mixed through the session, with PMI Manufacturing and Services results coming in almost squarely at consensus forecasts. According to official breakdowns of composite Purchasing Managers’ Index data, output growth in services and manufacturing industries slowed to their lowest levels in at least five months. Such figures are hardly a ringing endorsement for European economic strength, and a continued downtrend in these key numbers damage the case for further European Central Bank interest rate increases. As it stands, markets have clearly scaled back expectations for ECB rate hikes. Yet the central bank remains resolutely hawkish, and forex speculators may wait for a clear shift in rhetoric before ruling out further rate increases.
[I]Written By: David Rodriguez, Currency Analyst for DailyFX.com[/I]