Great Graphic: Flash EZ PMI and GDP

The euro zone flash PMI composite reading rose to its best level since May 2011.  This Great Graphic from Markit, which compiles the data, shows how good it is at tracking the area's GDP. 

The euro area economy expanded by 0.1% in Q3 13 and 0.2% in Q4 13.  The composite PMI averaged 53.1 in Q1 after from 51.9 in Q4.  It would point to stronger growth in Q1 when it is reported late next month.  

Composite output was above the 50 boom/bust level for the 10th consecutive month.  New orders in the composite reading were at 3-year highs.  Employment rose to its highest level since Sept 2011. The price components were more disturbing.  Input prices slipped to a 10 month low.  Manufacturing prices were particularly weak and this may be a reflection of the euro's strength in part.  Output prices softened slightly and have been below 50 for 25 months. 

 The next key report is the flash CPI reading due on April 30.  However, barring a downside surprise, dramatic action by the ECB is unlikely at the May meeting.  ECB officials appear fairly confident that inflation will tick up as the distortion caused by Easter will be reversed.  There is also a sense that in order to take unorthodox action, the ECB will want to ensure that it is consistent with staff forecasts, which will be updated in June. 

The market appears poised to push the euro higher.  Even the heightened tensions with Russia, including NATO troop movement, the euro is trading near 4-day highs.  Technical indicators, like the RSI and MACDs are turning up.  Initial resistance is seen near $1.3865 and a trend line off the March 13 high (~$1.3965) and April 11 high (~$1.3905), which comes in near $1.3885.