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Eurozone PMI Confirms Patchy Recovery

Laura Brodbeck

The euro was steady at $1.3602 at 5:30 GMT on Tuesday morning after a rocky start to the week on Monday. The common currency was weighed down by tepid PMI data which indicated that the region's sluggish recovery was continuing to stall.

The Wall Street Journal reported that the eurozone's June flash Purchasing Managers Index fell to 52.8, a six month low. Even more disappointing was France's score of 48, below the 50 point mark that separates contraction and expansion. Germany fared better, though still below expectations with a score of 54.2. The figures confirm what most were assuming; that the region's recovery has begun to taper off.

Very Accommodating ECB

Over the weekend, European Central Bank President Mario Draghi asked for patience from investors as the bank's stimulus program takes effect.

Related Link: Euro Slightly Recovers On ECB Statements, Slightly Weakens On PMI Data

Earlier this month the bank lowered its interest rate and took the deposit rate below zero, marking the first time any major central bank has penalized banks for holding on to large sums of money. Additionally, the bank is planning to roll out targeted loans in September that will incentiveize lenders to loan to mid-sized businesses. Draghi reiterated that the bank had more tools, including more aggressive quantitative easing, if the current stimulus proves too conservative.

America's More Solid Ground

Meanwhile data from the US moved in the opposite direction with existing home sales data adding to a growing list of better than expected US economic reports. The figures showed that sales of previously owned homes rose by 4.9 percent in May, the second consecutive month of improvement.

The data was encouraging to investors as it indicates that the US housing market is heading back toward solid ground, something the Federal Reserve has expressed concern about. The report also helped boost the dollar as many began to speculate about how the housing market's improvement might tie into a rate hike from the Fed.

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