Forex News – Euro drops after weak PMI data

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PMI numbers fell across the board today, in the euro zone, France and Germany, highlighting slow recovery in Europe.

The further drop in the euro zone PMI is a disappointment following the brief return to growth seen in January.  Flash manufacturing PMI fell to 47.7 in March, lower than the forecasted 49.6, and the previous  49.0. Flash services PMI fell to 48.7, from 48.8. Expectations were for a rise to 49.3. A reading of less than 50 indicates a contraction in activity.

“The euro-zone economy contracted at a faster rate in March, suggesting that the region has fallen back into recession, with output now having fallen in both the final quarter of last year and the first quarter of 2012,” said Chris Williamson, chief economist at Markit. A recession is widely defined as two consecutive quarters of shrinking gross domestic product.

Separate PMI data from France and Germany also disappointed and came in weaker than expected. These results were posted before the overall euro zone PMI and euro began declining against the dollar and yen after this data.

EURJPY dropped more than 1 percent, currently trading at 108.84 at 09:20 GMT, versus an early European session high of 110.45. EURUSD dropped to 1.3147 from 1.3253.

Earlier on Thursday, China PMI reported lower than expected numbers, signalling a slowdown in the world’s second largest economy. This raises concerns over global growth risks which could be heading to the downside.