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    European Session – Dollar weakens on dismal US ISM manufacturing PMI, jobless claims

    The euro was subdued during most of the European session, extending its decline from the Asian session as weakness was driven by an improvement in the broader market sentiment followed by mixed Eurozone PMI data. The euro tested a low of 1.1134 before bouncing back due to a softening dollar after disappointing US economic data.

    Manufacturing PMI numbers out of the Eurozone today were neutral to negative, with disappointment out of Germany, Spain and Italy, and a neutral final PMI for the euro area aggregate, which was as expected at 52.0. The data will add to concerns for the ECB as policymakers consider more accommodative policy, especially after Tuesday’s disappointing Eurozone CPI.

    Sterling strengthened after UK manufacturing PMI rose to 51.5 in September, just above expectations of 51.3 and up from a revised reading of 51.6 in August. Cable ticked up throughout the session to a high of 1.5179, given an extra boost by a softening dollar.

    The greenback was hurt by disappointing US initial jobless claims data as well as a deterioration in the ISM manufacturing report. The dollar lost the key 120 yen handle and fell to 119.48 yen.

    The number of Americans filing for first-time unemployment benefits rose by 10,000 for the week ending September 26, to a seasonally adjusted 277,000 jobless claims, versus a 270,000 estimate. Meanwhile, the ISM manufacturing report fell to a two-year low of 50.2 in September from 51.1 in August. This was the lowest level since May 2013 and raises concern as to whether the Fed will hike interest rates before year end. Focus now shifts to Friday’s all-important US nonfarm payrolls report.

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