The euro fell against other major currencies in European markets on Monday after data showed that economic activity in the euro zone contracted more than expected in September.
Euro zone business activity contracted more than expected in September, with the corresponding PMI falling to 48.9 from 51.0, as both the services and manufacturing sectors weakened, S&P Global data showed.
And private sector activity in Germany contracted further in September as the decline in manufacturing output accelerated, according to S&P Global data. The headline gauge, the HCOB composite output index, fell to 47.2 in September from 48.4 in August, its lowest level in seven months. The index is forecast to fall more slowly to 48.2.
Moreover, further signs of weakness would raise market expectations that the European Central Bank (ECB) will cut interest rates for a third time in October.
European stocks fell as investors reacted to weak corporate activity data and recent political developments in the region.
Similarly, growth across UK businesses slowed in September.
In political news, German Chancellor Olaf Scholz’s Social Democrats (SPD) narrowly defeated the far-right Alternative for Germany (AfD) in the elections in the east German state of Brandenburg, according to official results released this morning.
In France, Prime Minister Michel Barnier said the new government could raise taxes on big corporations and the wealthy to help close the budget deficit.
Meanwhile, in the UK, Chancellor of the Exchequer Rachel Reeves said there would be no return to austerity or widespread cuts despite the financial difficulties.
In the European market today, the Euro fell against the Pound from an early high of 0.8387 to a two-year low of 0.8356. The EUR/GBP pair may test support around the 0.81 level.
In economic news, data released by S&P Global showed that UK private sector activity recorded further sustained growth in September, despite an easing since August. The flash headline production index fell to 52.9 in September from 53.8 in August. The services activity index fell to 52.8 in September from 53.7 in August. The expected score was 53.5.
The manufacturing purchasing managers’ index fell to 51.5, the lowest in three months, from 52.5 in August. Economists had expected 52.3.
The euro has fallen against the Swiss franc and the US dollar from early highs of 0.9503 and 1.1168 respectively to four-day lows of 0.9435 and 1.1083. If the euro continues its downtrend, it is likely to find support around 0.92 against the Swiss franc and 1.09 against the US dollar.
The euro weakened slightly against the yen to 159.05 from a three-week high of 161.19. EUR/JPY is likely to find support near the 155.00 level.
The euro has fallen against the Australian, New Zealand and Canadian dollars from earlier highs of 1.6391, 1.7912 and 1.5140 respectively to a three-week low of 1.6278, a nearly three-week low of 1.7766 and a one-week low of 1.5049. On the downside, the euro’s next support levels are seen at 1.60 against the Australian dollar, 1.76 against the New Zealand dollar and 1.48 against the Canadian dollar.
Looking ahead, the Canadian New Home Price Index for August, the Chicago Fed National Activity Index for August, and preliminary S&P Global PMI data for September are scheduled to be released in New York.
