The euro moved extended its sharp slide vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3310 level and was capped around the $1.3660 level. The common currency has now fallen about fourteen big figures in about two weeks’ time. Today’s move lower followed worse-than-expected European economic data. First, EMU-15 December services PMI figure fell to 42.1 from 42.5 in November, a new ten-year low and well below the 50.0 boom-or-bust level. Second, the EMU-15 December consumer price index printed at a two-year low of 1.6% from 2.1% in November, below the European Central Bank’s 2.0% ceiling target. ECB Vice President Papademos said the ECB will now allow the rate to stay too far below 2% for too long and most traders believe the ECB will ease rates by at least 50bps on 15 January. Third, the PMI employment sub-index fell to 46.2 from a revised 47.3, an indication firms are slashing jobs more aggressively than expected. Fourth, the PMI survey’s price measures declined to their lowest levels since June 2003, the latest indication that inflation is not a major policymaking challenge. France’s and Germany’s service sectors shrank at their fastest paces in 10% and 11%, respectively, in December. In U.S. news, November pending home sales were off 4.0%, a deeper decline that expected. Also, November new factory orders were off 4.6%, the fourth consecutive monthly decline, while the December ISM services index printed at 40.6. Euro bids are cited around the US$ 1.3055 level.
Join the Discussion