The euro was weak today in reaction to softer PMI’s across the Euro area. Eurozone flash manufacturing PMI fell to 52.2 in July from 52.5 in June, against expectations that it would stay unchanged. Services PMI was also lower, dropping from 54.4 to 53.8, versus forecast of 54.2. The figures are still comfortably above 50 though, indicating expansion, but at a slower rate. The composite PMI came in at 53.7, down from June’s 54.2. German and French manufacturing and services PMIs also came in softer.
The euro fell against the dollar after the data to touch as low as 1.0924 after reaching as high as 1.0995. A further decline was halted after disappointing US home sales data helped the euro bounce back to 1.0967.
Sterling was soft, falling in tandem to the euro to touch fresh 8-session lows in response to softer PMI from Europe. Today’s weakness in the pound comes a day after disappointing UK retail sales data that also hurt the currency.
Cable traded as low as 15465 in European trading today, moving further way from yesterday’s high of 1.5669. Poor US housing data and a subsequent weaker dollar helped the pound rise back to 1.5509.
The dollar was flat against the yen, consolidating within a narrow range for a third consecutive session, between 123.79 and 124.08. There was limited movement in reaction to flash PMI’s from Japan and China. There was more reaction to the disappointing US new home sales data which fell to their lowest levels in seven months.
Sales for new single-family homes declined 6.8% to a seasonally adjusted annual rate of 482,000 units, the lowest level since last November. The forecast was for sales to remain unchanged from May’s initial reading. In a further sign of weakness, May’s figure was revised lower to 517,000 units from the previously reported 546,000 units.
Next week’s FOMC announcement would be an important risk event for the dollar to look for more insights into the Fed’s policy as speculation grows for a September rate hike.
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