EZ Final PMI reading showed a marked improvement rising to their best levels in more than three months helping to keep risk FX bid in early morning European trade. The EZ combined PMI was upwardly revised to 46.7 from 45.7 with German Services PMI rising to 49.7 – just shy of the 50 boom/bust level.

The PMI data shows that economic activity in the Eurozone remains in contractionary territory but if off its lowest levels of the year suggesting that the worst of the sovereign debt crisis may be over. European monetary union has been wracked by the chronic sovereign debt problems that have forced draconian austerity measures on many of its periphery member nations which in turn has weighed on both investor sentiment and aggregate demand, as slowdown spread from periphery to the core.

However, the latest improvement in periphery yields and the rebound in EURCHF which is now trading above the 1.2150 level indicate that the threat of default risk is now receding and that may ease the credit conditions in the region helping Europe recover in H1 of next year.

Euro has held steady above the 1.3100 level, rising to a high of 1.3125 before stalling on reported defense of option barriers ahead of the 1.3150 level. The pair remains well bid and if risk flows continue into North American trade will likely test those levels as the day proceeds.