The Euro has fallen below the $1.30 mark and has weakened against the majority of its major currency peers after weak Purchasing Managers Index (PMI) data sent investors seeking shelter in safe haven currencies.
The data showed that services and manufacturing output across the Eurozone shrank for the 15th month in a row, reinforcing the signs that the region’s recession is worsening. A euro-area composite index based on a survey of purchasing managers in services and manufacturing held at 46.5 in April, below the level of 50 that separates contraction from expansion.
The data has also raised investor expectations that the European Central Bank could cut interest rates in a bid to bolster the economy. Such a move is unlikely to be of any benefit however as the interest rate is already at a record low level of 0.75% and no improvement has been forthcoming.
“The case for a rate cut is very strong right now” Said a European economist at Daiwa Capital Markets.
The data that is expected to cause the highest concern is the PMI data that showed that German production declined to 47.9, down from economist expectations that it would come in at 49. France meanwhile showed a slight improvement rising to 44.4 from 44. With contagion from the Euro crisis now embedding itself into the heart of the Eurozone, economists and politicians have to find alternatives to their failed austerity measures.
“Previously, we’ve seen Germany expand while other countries have contracted – notably Spain, Italy and France,” said Chris Williamson, chief economist at Markit.”Now it seems those contractions are being accompanied by a downturn in the largest economy, Germany, and that will no doubt act as a drag on growth.”
The Euro looks set to remain negative for the foreseeable future at least until the region begins to show sign of improvement.
“The forward-looking indicators suggest there’s a risk to the downside for the contraction to gather pace,” added Williamson.
Current Euro Exchange Rates
As of 10:30 am GMT
The Euro to Pound Sterling exchange rate is currently trading in the region of 0.8526
The Euro to US Dollar exchange rate is currently trading in the region of 1.2979
The Euro to Australian Dollar exchange rate is currently trading in the region of 1.2675
The Euro to New Zealand Dollar exchange rate is currently trading in the region of 1.5476
Comments are closed.