The euro fell today to its lowest levels during the session after the strong rises this week, declining by more than 0.3% and reaching the level of 1.09492 in the day’s maximum declines at approximately 8:45 a.m. GMT.
Today’s euro reversal comes with mixed purchasing managers’ figures for euro zone economies and a further decline in bond yields. Today we witnessed the preliminary reading of S&P Global Purchasing Manager Indices (PMI) for France, Germany and the Eurozone.
In France, manufacturing activities contracted at the highest pace since May 2020, with the manufacturing PMI reading at 42 points, which was below expectations of 43.3. Services activities also continued to contract, this time more than expected, with a reading of 44.3 compared to expectations of 46.1.
In Germany, the figures were less bad despite the continued contraction of economic activities. However, manufacturing activities contracted at the slowest pace since May of this year, with a reading of 43.1, which was in line with expectations. While services activities continued to contract more than expected and at a faster pace than last August, with a reading of 48.4, which is lower compared to 49.9 that was expected.
The Eurozone as a whole recorded almost similar figures, as the PMIs recorded readings of 44.2 and 48.1 for both manufacturing and services respectively, which was also what was expected at 44.5 and 49.0.
these figures, along with the whole fourth quarter numbers, represent the worst performance of economic activities in 11 years, with the exception of those during the spread of the COVID-19 epidemic in the year 2020, according to the S&P Global report.
S&P Global indicated in its reports today that the decline in activities was with companies tending to reduce their expenses, which led to a further decline in employment in light of the scarcity of new orders in addition to the gloomy outlook about the future of the region’s economy, which in turn comes due to high interest rates and the surrounding geopolitical concerns as one of the most important factors.
The continuation of this trend of contraction in economic activity and employment, although relatively less severe than in many months this year, may put further pressure on monetary policymakers at the European Central Bank (ECB) and encourage them to cut interest rates next year.
However, these pressures, in turn, may collide with upside inflation risk concerns, which may keep current rates at their high levels for a longer period than expected.
The fall in bond yields to the lowest levels since last March contributed to putting more pressure on the euro to give up yesterday’s gains in addition to today’s negative data. The yield on ten-year German bonds fell to 2.054% at the maximum decline today at approximately 9:20 am GMT.