RTTN:Euro Sees Renewed Pressure As Disappointing PMI Data Signals Rate Cut
The euro came under renewed pressure in early deals Tuesday as a disappointing manufacturing data in the region's biggest economy and a continued contraction in the eurozone manufacturing sector revived chances of a possible interest rate cut by the European Central Bank at its next meeting on May 2.
Preliminary results of a survey by Markit Economics showed that German private sector contracted at the fastest pace in six months in April, ending a four-month period of expansion.
The flash composite output index, that gauges activity in both manufacturing and services, fell to 48.8 in April from 50.6 in March. Readings above 50 indicate expansion of the sector while readings below 50 suggest contraction.
The manufacturing purchasing managers' index fell to a four-month low of 47.9 from 49 in March, suggesting further worsening of operating conditions across the factory sector. The manufacturing output index fell to a four-month low of 47.9 from 50 in March.
In the whole eurozone, the private sector contracted in April. Preliminary results of a survey by Markit Economics showed that the composite output index, that gauges activity in both manufacturing and services, was at 46.5 in April, unchanged from March. Economists expected the reading to fall to 46.3.
The services activity index scored 46.6 in April, up from 46.4 in March. This was forecast to rise to 46.5. The manufacturing purchasing managers' index fell to a four-month low of 46.5 from 46.8 in March. This compares with forecast of 46.7. The manufacturing output index fell to 46.3 from 46.7 in the previous month.
European bourses are trading higher despite weak manufacturing and services data. However, Asian stocks were broadly lower after a preliminary report showed Chinese manufacturing activity expanded less than economists estimated.
China flash HSBC Purchasing Managers' Index for April fell to a two-month low of 50.5 from a final reading of 51.6 in March, suggesting the world's second-largest economy still faces considerable headwinds into the second quarter.
Swiss trade surplus declined in March, but still remained higher than economists' forecasts, the latest data from the Federal Customs Administration showed today. The surplus fell to CHF 1.9 billion in March from CHF 2 billion in February. Economists expected a decline to CHF 1.8 billion.
Standard & Poor's on Tuesday said there is more than a one-third chance that they will downgrade Japan's 'AA-' sovereign rating as there are risks associated with recent government initiatives. "The continuing prospect of a downgrade arises from risks associated with recent government initiatives and uncertainty of their success," it said.
The U.K. public sector net borrowing, excluding the temporary effects of financial interventions, came in at GBP 15.1 billion in March, slightly below economists' forecast, the Office for National Statistics said today. Economists had predicted PSNB to be at GBP 15.5 billion. The latest net borrowing figure was GBP 1.6 billion lower than in March 2012.
The euro slipped back to below the key 1.30 level against the US dollar for the first time in two weeks, falling as low as 1.2973 around 5:15 am ET, down by more than 0.8 percent from Asian session's 4-day high of 1.3083. The EUR/USD pair is poised to challenge its 200-day SMA at 1.2935 as last week's failed test of 1.32 resistance suggested a bearish extension.
The common currency fell to a 4-day low of 0.8520 against the pound, shedding almost 0.3 percent from Monday's close of 0.8545. The next bearish barrier for the currency cross is seen around the 0.85 area and a move below that level could set an 11-day low for the pair.
The euro reached a 5-day low of 127.88 against the yen, having depreciated by 1.5 percent from yesterday's close of 129.80. If the euro-yen pair extends downtrend, 127.25 is seen as the next likely support level.
On the flip side, the euro advanced to nearly a monthly high of 1.2225 against the Swiss franc due to across the board weakening of the latter, adding 0.15 percent from yesterday's closing quote of 1.2206. If the euro extends advance, likely resistance is seen around the 1.2255/60 area.
