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The euro-to-dollar exchange rate is set to fall for a third consecutive week after disappointing economic survey results showed the economy weakened in June.
S&P Global said its PMI survey of the euro zone economy showed “the economic recovery slowed at the end of the second quarter of this year.”
The composite PMI was 50.8, down from 52.2 in May and below the consensus forecast of 52.5. Manufacturing remained in contraction territory at 45.6 (Expected: 47.9; Preliminary: 47.3). The services sector continued to lead the economy, recording expansion at 52.6 (Expected: 53.5; Preliminary: 53.2).
The euro was sold off ahead of the euro zone PMI release as markets were focused on the German and French PMIs, which were released 45 and 30 minutes before the euro zone PMI release, respectively. All of the indicators came in below expectations, resulting in a sea of disappointment.
The euro fell 0.3 percent against the dollar in the 45 minutes following the German announcement.
Companies reported the first decline in new orders in four months, reflecting slowing business activity and job growth, according to S&P Global.
Above: EURUSD on June 21st. Track EUR/USD with your own alerts, learn more here.
The European Central Bank (ECB) cut interest rates in June but may cut again in the coming months after input cost and output price inflation fell to their lowest levels in six and eight months, respectively.
Business confidence fell to its lowest level since February.
“The decline in the June PMI suggests that growth in the second quarter may be slower than initially expected. With surveys showing easing price pressures, this supports our view of a benign economic environment in line with expectations of very cautious easing from the European Central Bank,” said Bert Collin, senior euro zone economist at ING Bank.
