Eurozone PMI Fuels ECB Rate Cut Speculation

   on April 24 2013 8:58 AM

The euro declined on Wednesday in the aftermath of several reports of economic weakness the day before. The common currency was trading at $1.2975 at 8:43 GMT on Wednesday morning, at nearly a two week low.

A purchasing manager' survey showed that private sector activity was declining, and Markit Economics announced the region's composite index was 46.5, unchanged from the previous reading.

The index measures the activity in both the manufacturing and services sectors, and any number below 50 suggests a contraction.

The figure was concerning as it indicated that the ongoing economic crisis is far from over. The survey showed that new orders declined for the 21st month in a row and that the decline has been picking up speed for the past three months, with April being the steepest fall since December.

The report included statements from the Chief Economist at Markit, Chris Williamson, who indicated that several factors from the report suggest that the eurozone's downturn is more likely to intensify rather than ease.

Individually, Germany did not fare well on the PMI survey either. The nation's business activity fell for the first time since November causing concern that the eurozone's largest and strongest economy would not be an engine for the bloc much longer. Adding to uncertainty, the business climate index for Germany also dropped in April.

With so much disappointing data on the table, many foresee an interest rate cut at the next European Central Bank meeting. Board member Joerg Asmussen made statements over the weekend that indicated data such as Tuesday's could prompt the bank to cut borrowing costs.

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