Euro Sinks On Manufacturing Data

By Roger Baettig | January 03 2013 9:19 AM

The euro turned downward on Thursday morning, trading at 1.3140. The fall is attributed to new manufacturing data out on Monday that seemed to confirm sentiments that the eurozone was in for a troubling year.

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Following German Chancellor Angela Merkel New Year's address where she warned that 2013 could be worse than 2012, new manufacturing data out of the region seems to confirm that. In stark contrast to the positive data released by China and the US, Eurozone factory output was way down in December which added to speculation that the bloc's economy contracted in the fourth quarter. According to the Wall Street Journal, the data company Markit polled manufacturing purchasing managers to find a monthy index of 46.1 in December, down from November's number and far below the 50 threshold, which signals a contraction.

Large powerhouse economies like Germany and France showed large declines in manufacturing, which added to concern that the powerful northern economies would not be immune to the region's crisis.

However, the data had a bit of a silver lining as previously struggling Italy and Ireland posted better numbers that suggested improvement. Italy, the third largest economy in the region, showed improvement as it posted its least negative reading in months.

Ireland, which went through a bailout and painful austerity measures to get out of debt only years ago, was the only eurozone country post a number over 50, which showed month to month growth. Irish Deputy Prime Minister Eamon Gilmore told reporters on Wednesday that the country could return to funding itself and exit its bailout program as early as this year.