Still no love for the euro! With yesterday’s disappointing economic reports giving traders plenty of reason to dump the euro, the shared currency found itself on the sell side of the equation once again. It lost 19 pips to the dollar, 16 pips to the yen, and 52 pips to the pound.
It doesn’t take a genius to see that the euro zone’s economic woes are far from over. Yesterday’s PMI reports are proof enough! Save for the French flash services PMI, all of the reports we saw yesterday came in worse than expected.
The region’s manufacturing sector continued to contract as the index recorded a reading of 45.3 (versus 46.6 forecasts). The euro zone’s services sector PMI clocked in at 46.2, which is just under the 46.5 reading that many had anticipated.
Meanwhile, the German IFO business climate index slipped from 101.4 to 100.0, instead of rising to 101.5 as the median forecast had predicted.
What these numbers tell us is that euro zone businesses just went through their most devastating month since the recession three years ago. It also suggests that austerity measures may have already begun to take its toll on growth and that the euro zone’s economic slowdown may be getting worse. Cue the horror music!
In other news, Mario Draghi’s speech added to the gloomy mood as he said he expects the euro zone economy to underperform in the near future. He was disappointed that some of the region’s bigger countries didn’t implement rate cuts, and he claims that deflation presents a bigger risk than inflation at the moment.
We certainly have a lot to think about after yesterday’s heavy reports and events. Luckily, we’ll have plenty of time to mull over these things as the euro zone won’t be publishing any tier 1 reports today. In the meantime, if you plan on trading the euro, I suggest y’all keep risk sentiment in check. Peace and good luck, homies!