Euro Hit By Weak Data
The euro came under pressure after a series of poor data prints out of the Eurozone. Eurozone manufacturing PMI fell to 45.9 vs 46.0 consensus, a 34-month low. Readings in the periphery were more concerning however, with some of the components showing sharp drops. Risk assets elsewhere turned slightly lower as a consequence, but the focus remained on the euro which shed 80-pips as the soft data trickled out. At the time of writing, S&P futures and equity markets across Europes were generally flat. The Australian dollar consolidated overnight in the wake of Tuesday’s surprisingly aggressive 50 bp cut by the RBA. A slight upward revision to the private sector PMI out of China helped steady the ship, but memories of the RBA’s move were too fresh to allow AUDUSD to mount a significant recovery. It is hard to see investor confidence in the currency returning ahead of the upcoming quarterly Statement of Monetary Policy which is due on Friday. The scale of the RBA’s move has raised fears that the inflation and growth forecasts could be revised down quite sharply, potentially opening the door for further cuts. Reassurance is certainly needed on both fronts. Ahead today, data is thin in the US, but we have PMI numbers due across Europe and BoE Governor Mervyn King is speech.
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UBS Investment Bank