The euro firmed against its major counterparts in the European session on Tuesday, amid better-than-expected business activity readings across the euro area and rising Eurozone bond yields in the wake of growing expectations for a rate hike by the European Central Bank as soon as next year.

Flash survey results from IHS Markit showed that Eurozone business activity growth accelerated in November driven by inflationary pressures.

The composite output index climbed to 55.8 from 54.2 in October. The expected score was 53.2.

The services PMI improved to 56.6 from 54.6 in October. Economists had forecast a reading of 53.5.

The manufacturing PMI rose to 58.6 from 58.3 in October. The reading was forecast to fall to 57.3.

German private sector grew at a faster pace in November, although the upturn was only moderate amid subdued manufacturing growth.

The composite output index climbed to 52.8 in November from 52.0 in the previous month. The reading was forecast to fall to 51.0.

The manufacturing Purchasing Managers' Index dropped to 57.6 from 57.8 a month ago. Nonetheless, the score stayed above the expected level of 56.9.

The services PMI improved to 53.4 from 52.4 in October. The score was also above economists' forecast of 51.5.

Separate data showed that France's private sector growth accelerated to a four-month high in November driven by strong expansion in services, while manufacturing production registered back-to-back declines.

The final composite output index advanced unexpectedly to 56.3 in November from 54.7 in October. The score was forecast to drop to 53.6.

The services Purchasing Managers' Index rose to a 46-month high of 58.2 from 56.6 in the previous month. The expected reading was 56.0.

The manufacturing PMI posted 54.6 in November, up from 53.6 in October. Economists had forecast the index to fall to 53.0.

Eurozone bond yields rose following comments from ECB policymakers indicating upside risks to the inflation outlook.

ECB board member Isabel Schnabel said that it may be appropriate to end the PEPP purchases despite the new coronavirus wave.

The euro touched 4-day highs of 0.8425 against the pound and 1.0497 against the franc, following its prior lows of 0.8383 and 1.0467, respectively. The euro is seen finding resistance around 0.86 against the pound and 1.06 against the franc.

The euro edged up to 1.1275 against the greenback, from a 1-1/2-year low of 1.1226 seen at 9:15 pm ET. On the upside, 1.14 is likely seen as its next resistance level.

The euro climbed to a 5-day high of 1.4355 against the loonie, 4-day high of 1.5619 against the aussie and an 8-day high of 1.6262 against the kiwi, after falling to 1.4253, 1.5534 and 1.6127, respectively in early deals. Next key resistance for the euro is seen around 1.45 against the loonie, 1.58 against the aussie and 1.66 against the kiwi.

The European currency rose back to 129.35 against the yen, not far from a 4-day high of 129.39 seen in the Asian session. If the euro rallies again, 131.00 is likely seen as its next resistance level.

Looking ahead, Canada manufacturing sales for October and Markit's U.S. flash composite PMI for November are scheduled for release in the New York session.

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