The Euro exchange rate softened against both the Pound (EUR/GBP) and US Dollar (EUR/USD) as economic data out of the 18 member Eurozone disappointed economist forecasts and raised fears over the health of the region’s economy.
Earlier in the session, data out of the Eurozone showed that activity in the currency blocs private sector slowed in November increasing concerns that the economy will continue to expand weakly or not at all in the fourth quarter.
According to data firm Markit, the regions composite Purchasing Managers Index (PMI), the index that measures activity in both the industrial and service sectors, fell from October’s figure of 52.1 to 51.4 in November. The fall marked the PMI’s lowest reading in 16-months.
In a PMI report, a reading below 50 indicates contractions whilst a number above indicates expansion.
The disappointing report puts more pressure upon the European Central Bank (ECB) to introduce more measures to help stimulate the economy.
“If necessary to further address risks of too prolonged a period of low inflation, the governing council is unanimous in its commitment to using additional unconventional instruments within its mandate,” Mr. Draghi told members of the European Parliament on Monday.
With the performance of the Eurozone’s top three economies being what can only be described as poor the ECB may have to implement more measures sooner than it had hoped.
Inflation remains dangerously close to deflation territory despite a slight rise being recorded last week, unemployment remains staggeringly high and nothing seems likely to help job creation.
Adding to the pressure building on the Euro was the publication of consumer confidence data. According to the report published by the European Commission, sentiment fell unexpectedly to a reading of -11.6 this month, down from the 11.1 figure recorded in the preceding month. Economists had been forecasting for a slight improvement to -10.7.
The Pound (GBP) exchange rate found support after data showed that UK retail sales increased strongly in October. Sales increased by 0.8% on a monthly basis and by 4.3% on a yearly basis. Further gains were restrained however as some economists were concerned that prices fell sharply as stores battled for customers.
The US Dollar (USD) exchange rate inched higher against the Euro after the Philadelphia Fed Manufacturing Index smashed all forecasts by soaring to 40.8 from 20.7. The figure means that manufacturing activity in the Philadelphia region expanded at its fastest rate since December 1993.
The surprisingly strong figure countered softer than expected Jobless Claims and Inflation data.
Strong existing home sales data also supported the ‘Greenback’.
Euro Exchange Rate News:
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