Forex Market Review – Euro falls to new 22-month low after poor German data

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Euro hit a new near two-year low versus the dollar after disappointing economic data showed that Europe’s largest economy was not immune to the euro zone crisis. German Ifo business climate and manufacturing PMI numbers came in worse than expected. Meanwhile, euro zone PMI also printed lower than forecast showing the region is still in a contraction phase.  Today’s data adds to sentiment that was already damp after an EU leaders summit on Wednesday failed to progress on new measures to  tackle the euro zone debt crisis.


EURUSD dropped to 1.2514, the lowest since July 2010, before steadying to the upper 1.25’s due to profit-taking. Euro remains bearish, with only about three weeks to go until Greece holds elections, concerns are deepening over the possibility of a Greek exit from the euro zone. EURJPY slid to 99.34, the lowest since February 1st.


Sterling fell after a report showed that U.K. first quarter GDP was revised lower than the preliminary reading. Data show that the economy contracted by 0.3 percent versus a previous estimate of a 0.2 percent drop. GBPUSD fell in a knee-jerk reaction after the data by over 20 pips to 1.5644 from where it was at 1.5669 before the news at 08:30 GMT. The pair has since retraced to the upper 1.56’s.


The Swiss franc touched a 15-month low against the dollar, with USDCHF hitting a high of 0.9594 in the Europe session, which is the highest level since February 2011. The franc fell in line with the euro as the disappointing  German economic data hurt riskier currencies across the board and investors turned to the safe haven dollar.  The stronger dollar pushed the dollar index to a fresh 20-month high of 82.362 today.


The U.S. dollar remained firm against the Canadian dollar, with USDCAD hitting 1.0281, not far from a four-month high reached yesterday.  Focus turns to U.S. durable goods orders and employment claims data which are due in the U.S. trading session later today.


The Australian dollar fell 0.3 percent against the greenback, not far from a six-month low of $0.9688 hit on Wednesday.   Data showing that China’s factories slowed in May had limited impact on the aussie, as markets had been expecting a weak reading and focus remained on headline news from Europe.


Against the safe haven yen the dollar edged down slightly to 79.34 yen from an early session high of 79.52. Bank of Japan governor Masaaki Shirakawa said today that the BOJ was committed to maintaining its ultra-loose monetary policy but would not ease solely to weaken the yen.