Forex News – Euro drops after soft PMI data from France and Germany

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The euro extended its fall against the dollar following disappointing PMI data from France and Germany, the two largest euro zone economies.

The French data showed private sector output declined faster in April. The report compiled by Markit showed the Flash Composite Output Index, fell to the lowest in six months, posting 46.8 from 48.7 in March. This was driven by a much weaker performance by the service sector, where activity was down for the first time in five months during April.

Meanwhile, German PMI data were released shortly after, unexpectedly showing manufacturing shrunk  at its fastest pace in nearly three years in April. This disappointed markets, since Germany is considered to be the euro zone’s engine of growth.

Markit’s flash manufacturing PMI fell sharply to 46.3 from March’s 48.4, well below the 50 mark which would signal growth in activity. This records the fastest rate of contraction since July 2009 in the manufacturing  sector, which has been hit by a decline in exports due to the euro zone debt crisis.

EURUSD dropped sharply after the data, falling to a session low of 1.3133 by 08:00 GMT from an earlier session high of 1.3190.