Euro Breaks Below 1.30 on German PMI Disappointment
The Euro declined below 1.3000 against the US Dollar following a contraction in German services activity for the first time in five months, according to Markit’s Purchasing Managers’ Index.
The Euro-zone advanced composite output index was reported at 46.5 in April, meeting expectations for the index to remain unchanged. The PMI for manufacturing slightly disappointed expectations with a decline to 46.5, and the PMI for services slightly beat expectations with a rise to 46.6. A PMI below 50.0 indicates contraction in the sector’s activity, and the composite Euro-zone PMI has remained below 50.0 since January of 2012.
New business in the Euro-zone services and manufacturing declined for the twenty first month, with the rate of deterioration accelerating for the third straight month. German PMI’s for manufacturing and services both significantly disappointed expectations, at 47.9 and 49.2 respectively. Meanwhile, France showed a better than expected reversal in PMI’s to 44.4 and 44.1 in manufacturing and services.
Following the 0.6% decline in Euro-zone GDP in Q4 of 2012, Markit reported that the PMI’s for Q1 show a 0.2%-0.3% economic contraction. Markit further said that the ongoing recession will continue into Q2 according to April’s PMI’s. “The survey is signaling a worrying weakness in the economy at the start of the second quarter, with signs that the downturn is more likely to intensify further in coming months rather than ease,” according to Markit Chief Economist Chris Williamson.
The sharp downturn in German PMI’s pulled the Euro about 80 points lower against the US Dollar, and the pair fell below 1.3000 for the first time in two weeks. The pair may next see support at 1.2917, by the 76.4% retracement of the rally from November’s low to February’s high. Resistance may now be provided by the key 1.3000 figure.
(How does a Currency War affect your FX trading? Take our free course to find out!)
EURUSD Daily: April 23, 2013
Chart created by Benjamin Spier using Marketscope 2.0
-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to firstname.lastname@example.org .
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.