Euro falls after weak German, French PMI datawritten by Bella Palmer
Against the U.S. dollar, the single currency declined 0.4% to $1.0522
The euro fell across the board on Thursday as weaker-than-expected German and French PMI data confirmed that the euro zone economy is struggling to gain traction, prompting traders to trim bets on big interest rate hikes from the European Central Bank.
High prices in the euro zone meant demand for manufactured goods fell in June at the fastest rate since May 2020 when the coronavirus pandemic was taking hold, with S&P Global's headline factory Purchasing Managers' Index (PMI) falling to a near two- year low of 52.0 from 54.6.
The (PMI) manufacturing/services ratio tends to be a good barometer for pro-cyclical currencies. The ratio has sharply dropped relative to the U.S., said Mazen Issa, senior FX strategist in a research note.
This dynamic is typically consistent with further U.S. dollar resilience. This could be bolstered as recession fears mount, he added.
Following the data, money markets priced in about 30 basis points (bps) of rate hikes in July compared to 34 bps on Monday. Traders also trimmed their expectations of how much the ECB will hike rates by the end of 2022 to 161 bps compared to 176 bps on Monday.
Against the U.S. dollar, the single currency declined 0.4% to $1.0522. It earlier declined below a key $1.05 level for the third time this week. The euro also declined 1.6% versus the Japanese yen.
The euro's losses pulled the dollar away from earlier lows and sent the greenback into positive territory against its rivals after cautious comments by Federal Reserve Chair Jerome Powell on Wednesday weighed on sentiment.
The dollar index inched higher to 104.34, up 0.1%.
While markets have steadfastly held to the view the Fed is on track to raise interest rates by another hefty 75 bps in July, some analysts believe the ECB and the Bank of England will adopt a softer rate increase path or risk damaging growth.
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