Forex - Euro hits six-week highs vs. dollar after euro zone PMI’s

The euro rose to six-week highs against the dollar on Wednesday after data showed that the euro zone composite output purchasing managers’ index rose to its highest level in 18 months in July.

EUR/USD hit 1.3254 during European afternoon trade, the pair’s highest since June 20; the pair subsequently consolidated at 1.3242, gaining 0.14%.

The pair was likely to find support at 1.3162, Tuesday’s low and resistance at 1.3300, the high of June 20.

Markit's euro zone composite PMI output index rose to 50.4 from 48.7 in June on the back of stronger data from Germany and France, fuelling optimism that the euro zone economy could emerge from a recession in the third quarter.

Germany’s manufacturing PMI rose to 50.3 from June's reading of 48.6, and the service sector PMI jumped to 52.5, from 50.4.

The French manufacturing PMI ticked up to a 17-month high of 49.8 from 48.4 in June, while France’s services PMI improved to 48.2 from 47.2 last month.

Demand for the dollar continued to be underpinned after data showing that Chinese manufacturing activity slumped to an 11-month low in July bolstered safe haven demand.

The preliminary reading of China’s HSBC manufacturing PMI fell to 47.7 in July, from a final reading of 48.2 last month. Analysts had expected the index to rise to 48.6. A reading below 50 indicates a contraction.

Elsewhere, the euro was rose to three-day highs against the pound, withEUR/GBP up 0.19% to 0.8618 and hit two-month highs against the yen, with EUR/JPY climbing 0.66% to 132.38.

The U.S. was to produce official data on new home sales later in the trading day.