Even with recovery, inflation should make EURO fall against the USD

The service sector indicators (PMI – Purchasing Managers Index) released in the euro area showed continuous improvement in the region. France reached 53.4 as predicted, well above January 49.4, which confirms that the prospects for France’s domestic economy have started to improve. Germany was below the preliminary estimate, but even better than the previous month. This data brought the Eurozone number to 53.7, the highest level since July 2014. Retail sales in Europe have also improved.

The recent recovery in Europe, especially in Germany, suggests that the ECB should announce a growth forecast at this Thursday’s meeting. However, we do not expect the ECB to do the same with inflation projections, which should force the EUR / USD quote to 1,1100. If this confirms we can reach 1.1025.