Morning Forex Fundamental

EUR

'The euro zone is being buffeted by major headwinds' - Howard Archer, chief European economist at IHS Global Insight

European manufacturing and services sectors shrink

Impact high

European manufacturing and services industries contracted in May. A composite index based on a survey of purchasing managers in manufacturing and services sectors declined to 45.9 from 46.7 in April, said the Markit Economics on Thursday.

'The euro zone is being buffeted by major headwinds, notably increased fiscal tightening in many countries and markedly rising unemployment,' said Howard Archer, chief European economist at IHS Global Insight in London.

'The heightened Greek crisis is magnifying the problems by weighing down on already weak and fragile business and consumer confidence, adding to uncertainty about the outlook.'

The Stoxx Europe 600 Index added 1.00 per cent to 241.91. Germany’s DAX Index rose 0.48 per cent and France’s CAC 40 Index gained 1.16 per cent. The U.K.’s FTSE 100 Index climbed 1.59 per cent to 5,350.05.

USD

'It looks more and more like businesses are hesitating to invest in the face of worsening uncertainties in the and global economy' - Pierre Ellis, a senior economist at Decision Economics

U.S. unemployment claims decline, durable goods orders edge higher

Impact High

The number of Americans claiming for unemployment benefits declined slightly by 2,000 to a seasonally adjusted 370,000 in the week ended May 19 from the week before, said the Department of Labor on Thursday.

'We might see a modest pickup in (jobs) growth in May versus April,' said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.

'It looks more and more like businesses are hesitating to invest in the face of worsening uncertainties in the and global economy,' said Pierre Ellis, a senior economist at Decision Economics in New York.

Also Thursday, the Commerce Department said orders for long-lasting goods rose 0.2 per cent in April to a seasonally adjusted 215.5 billion dollars after declining 3.7 per cent in March

GBP

'[U.K.] employment remains fragile and wage growth weak' - Ross Walker, chief U.K. economist at Royal Bank of Scotland Group

U.K. economy shrinks more than forecast

Impact High

The U.K. economy shrank by more than expected in the first quarter of the year, revised figures have shown. Gross domestic product fell 0.3 per cent from a revised drop of 0.2 per cent, the Office for National Statistics said on Thursday.

'Despite all the problems in the euro area, France, Germany and the eurozone as a whole have so far avoided recession and only exports to other countries stopped us going into recession a year ago. The result is that Britain is now in a weaker position if things get worse in the eurozone in the coming months,' said shadow chancellor Ed Balls.

'The economy is not recovering properly and with the uncertainty over Europe hanging over the outlook as well, our suspicion is the Monetary Policy Committee [of the Bank of England] will sanction further quantitative easing (QE) at some point later on this year,' said Philip Shaw at Investec.