Euro Lower After Bundesbank's Growth Downgrade, Weak Eurozone And German PMI
December 14 2018 - 12:37AM
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The euro fell sharply against its major opponents in the
European session on Friday, after Bundesbank cut German growth
forecasts for this year and next and as business growth across the
currency bloc slowed further in December.
Data from IHS Markit showed that Eurozone business activity
slowed to the weakest in over four years in December, amid
stagnating new business inflows, slowdown in job growth and
deterioration in business optimism.
The composite purchasing managers' index fell to 51.3 from 52.7
in the previous month. Economists had expected a score of 52.8.
The manufacturing PMI dropped to a 34-month low of 51.4 from
51.8 in November. The reading was forecast to remain unchanged.
The services PMI declined to a 49-month low of 51.4, from
November's 53.4. Economists had expected the reading to remain
unchanged.
Separate data showed that German private sector activity grew at
the slowest pace in four years in December.
The composite purchasing managers' index, or PMI, which combines
manufacturing and services, dropped to 52.2 from 52.3 in November.
Economists had forecast a score of 52.4.
The manufacturing PMI dropped to a 33-month low of 51.5 from
51.8 in November. Economists had expected a reading of 51.7.
The services PMI decreased to a seven-month low of 52.5 from
53.3 in November. Economists were looking for a score of 52.4.
Germany's central bank slashed economic growth forecast for this
year and next citing downside risks to economy.
Bundesbank lowered its 2018 GDP growth forecast to 1.5 percent
from 2.0 percent projected in June. For 2019, the central bank
revised down the GDP outlook to 1.6 percent from previous estimate
of 1.9 percent.
European shares fell amid rising concerns about global growth
after the latest batch of economic data from China fell short of
expectations.
Weak eurozone economic data, disappointing manufacturing
activity reports from Germany and France, Brexit uncertainty and
doubts about U.S. and China striking a trade deal anytime soon are
all contributing to the weakness in the market.
Preliminary data from the Federal Statistical Office showed that
Germany's wholesale price inflation slowed in November, entirely
reversing the acceleration seen in the previous month.
The wholesale price index rose 3.5 percent year-on-year
following a 4 percent increase in October. The measure climbed at
3.5 percent in September.
The currency was trading mixed against its major counterparts in
the Asian session. While it declined against the greenback and the
yen, it held steady against the franc. Against the pound, it
rose.
The euro declined to more than a 2-week low of 1.1287 against
the greenback, after rising to 1.1365 at 7:45 pm ET. On the
downside, 1.10 is likely seen as the next support for the euro.
Pulling away from an early high of 129.12 against the yen, the
euro slipped to a weekly low of 128.12. The euro is seen finding
support around the 126.5 mark.
Data from the Bank of Japan showed that an index of business and
manufacturing sentiment in Japan held steady in the fourth quarter
of 2018.
The large manufacturing index was unchanged with a score of +19,
beating expectations for +18. The outlook came in at +15, shy of
forecasts for +17 and down from +19 in the previous three
months.
The single currency dropped to a 2-day low of 1.1242 against the
franc, from a high of 1.1295 seen at 12:30 am ET. The euro is
poised to challenge support around the 1.10 region.
The euro reversed from an early high of 0.9005 against the
pound, falling to 0.8961. Next key support for the euro is seen
around the 0.88 area.
The euro slipped to a weekly low of 1.5111 against the loonie,
after having risen to 1.5202 at 3:00 am ET. If the euro falls
further, 1.50 is likely seen as its next support level.
The common currency retreated to 1.5753 against the aussie and
1.6626 against the kiwi, from its early 4-day high of 1.5823 and
more than a 2-week high of 1.6728, respectively. The next likely
support for the euro is seen around 1.56 against the aussie and
1.64 against the kiwi.
Looking ahead, U.S. retail sales and industrial production for
November, business inventories for October and Markit's preliminary
services PMI for December are scheduled for release in the New York
session.
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