Fundamental Comment

Euro hits 4-week low after weak PMI data, Parliamentary elections eyed

Euro hits four-week low

The traded near its lowest level in four weeks on Thursday, as the slowdown in euro area economic activities added to trade war concerns.  

Currently, the EURUSD pair is trading at 1.1140, after hitting a bottom at 1.1129, extending its drop for a third straight session. 

The flash composite purchasing managers index (PMI), including manufacturing and services, dropped to 51.6 in May, compared to a previous reading of 51.5.

Chris Williamson, chief business economist at IHS Markit, warned that the growth pace in eurozone may retreat to 0.2% in the current quarter, compared with 0.4% in the first quarter.

European Parliamentary elections in focus

Later in the day, voters in the 28 European Union countries (including the United Kingdom) will elect legislators to the European Parliament.

Skeptics in Europe have increased their representation in Parliament from 12% to 25% in the last election, and with the significant increase in the power of popular parties, this trend may continue.

The strong emergence of parties with an anti-EU agenda may have a significant impact on the upcoming elections in Italy, where the people's government wants to lift its deficit on EU rules.

Also, the results of the vote could also have an impact on the selection of the new President of the European Central Bank, as Mario Draghi will step down in October, after ending an eight-year term.

Dollar strengthens, pound remains under pressure

The US dollar index, which measures the U.S. currency against a basket of six major currencies, registered its highest level in two years at 98.13, with an increase of 0.18 percent.

While the EUR/GBP pair, however, soared 0.2 percent to 0.8809, close to the highest level since mid-February.

The pound was hit hard after the resignation of the legislator in charge of organizing government work in the House of Commons Andrea Ledsum, instead of introducing the EU bill for Prime Minister Theresa May.

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