Forex Market Review – Euro extends decline on weak PMIs

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The euro plunged  to a fresh 23-month low against the dollar during Friday’s European trading session, dragged down by a string of dismal data on manufacturing purchasing managers index (PMI) as well as a higher unemployment rate in the euro zone. The May PMI for the euro area economies fell to 45.1 versus 45.9, the lowest since June 2009. Meanwhile April unemployment ticked up to 11 percent for the euro zone from 10.9 in March. Meanwhile the troubled Spanish banking sector contuse to cause market jitters. EURUSD opened in Europe at 1.2363 and fell to 1.2311, the lowest since 27 June 2010.


Cable fell to a 4-1/2 low after disappointing UK data showing May PMI declined to a three-year low at 45.9 due to a slump in manufacturing orders as the British economy is going through a recession. GBPUSD touched 1.5267 after dropping from an earlier high of 1.5393.


The Swiss franc dropped to new 15-month lows against the dollar on soft data. Swiss May PMI also disappointed, dipping to 45.4 versus a previous 46.9 and lower than expectations.  Swiss April retail sales fell by 1.7 percent. USDCHF continued its uptrend and climbed to a high of 0.9751 from 0.9712.


EURJPY opened in Europe at 97.02 and continued lower to a fresh 11-year low of 96.16, while USDJPY fell to 78.09.


The Canadian dollar weakened against its US counterpart amid damp market sentiment today. USDCAD rose to a 5-1/2 high of 1.0397. Focus turns to Canadian GDP data due later. Forecast is 0.4 percent growth versus a previous drop of 0.2 percent. Meanwhile US non-farm payrolls are due at the same time and may overshadow the Canadian data.


The Australian dollar extended its decline, weighed down by concerns of slowing global growth due to low PMIs all over. Soft China PMI particularly dragged the aussie down because China is a major trading partner for Australia. AUDUSD fell to 0.9631 during European trading hours, the lowest since October 2010.


Looking ahead, the US non-farm payrolls report is due today, with forecast for an additional 150,000 jobs to be created in May, versus a previous 115,000. This would be positive for dollar and should help market sentiment improve slightly.