FOREX-Euro falls after weak PMI weighs; Norway’s crown shines

By Saikat Chatterjee

LONDON, June 23 (Reuters) – The euro depreciated on Thursday after weak PMI data from Germany and France confirmed the eurozone economy was struggling to gain ground, prompting traders to cut bets aggressive on the European Central Bank’s interest rate hike.

Germany’s economy, Europe’s largest, suffered a sharp loss of momentum at the end of the second quarter, with falling exports acting as a drag and economic uncertainty and inflation weighing on domestic demand, a revealed Thursday a preliminary investigation.

France’s flash manufacturing PMI for June fell to 51.0 points from May’s 54.6, well below expectations for a smaller decline to 54.0 points.

“The forecasts below fuel the debate about deteriorating growth, falling yields and raise the question of how much the ECB can actually raise rates,” said Kenneth Broux, FX strategist at Societe Generale in London. .

According to the data, money markets were pricing in around 30 basis points (bps) of rate hikes in July, down from 34 bps on Monday. Traders also cut their expectations for the extent of the ECB’s rate hike by the end of 2022 to 161 basis points from 176 basis points on Monday.

Against the US dollar, the single currency fell 0.6% to $1.0498, breaking below the $1.05 line for the third time this week.

Norway’s currency was also a big winner against the euro after its central bank raised benchmark interest rates by 50 basis points on Thursday, its biggest rise since 2002 and twice as much as expected. by most economists.

The euro’s losses lifted the US dollar from previous lows and sent the greenback into positive territory against its rivals after cautious comments from Federal Reserve Chairman Jerome Powell on Wednesday weighed on sentiment and pushed stocks higher. falling Treasury yields.

Powell said in congressional testimony that the central bank was fully committed to bringing prices under control, even if it risked causing an economic downturn.

He said a recession was “definitely a possibility”, reflecting fears in financial markets that the Fed’s pace of tightening could dampen growth. Powell testifies in the House later that day.

(Reporting by Saikat Chatterjee; Editing by Kim Coghill)

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