WSJ; Poor Economic Data Hits Euro, Australian Dollar
By JESSICA MEAD
LONDON—A raft of disappointing data sent the euro sliding, while growing concerns over slowing Chinese economic growth slammed the Australian dollar.
The negative tone was set in Asian hours after a key gauge of Chinese manufacturing activity showed a decline in March, unnerving traders and sending shares and riskier currency bets like the Australian dollar deep into the red.
Euro-zone economic data and weakness in the bonds of fiscally stressed euro-zone countries further darkened the mood. German manufacturing activity unexpectedly contracted in March, while business activity in the euro zone as a whole shrank.
The weaker data sparked a selloff in the common currency, which sank to as low as $1.3133 against the dollar and to ¥108.79 against the yen. Yields on benchmark Spanish government bonds rose to their highest levels since January amid nagging concerns over whether the country will stick to its efforts to cut spending.
"The Chinese data opened the market's eyes to the possibility of slightly slower Chinese economic growth and the euro-zone PMIs were a lot weaker than people were expecting," said Sara Yates, currency strategist at Barclays.
The Australian dollar also continued to weaken, slipping below $1.04 against the greenback.
"What we're seeing is a topping out in positive data surprises from the beginning of the year. The most immediate impact will be on the Aussie dollar due to the confirmation of the weak Asian performance, because the biggest downside surprise really is on the Chinese side," said George Saravelos, senior currency strategist at Deutsche Bank in London.
Deutsche Bank now has a negative view on the Australian dollar against the yen, which was one of the day's few gainers.
Emerging European currencies also suffered, while the South African rand fell to a one-month low against the dollar.
Elsewhere, the pound fell sharply after disappointing U.K. retail sales data for February. Official figures showed U.K. retailers sold fewer goods than expected in February and January's sales were also weaker than previously reported. The pound fell to as low as $1.5770 against the dollar.
Thursday afternoon, the euro was trading at $1.3169 against the dollar, compared with $1.3216 late Wednesday in New York.The dollar was at ¥83.08, compared with ¥83.41. The pound was trading at $1.5801, compared with $1.5873 late Wednesday.
