Fundamental Comment

Euro tumbles to two-month low after dismal PMI data

Euro tumbles to two month low after dismal PMI data

The euro fell to a two-month low on Wednesday amid expectations that the European Central Bank could pave the way for monetary policy easing, especially after the release of dismal eurozone PMI data.

As of 09:55 GMT, the euro fell 0.11 percent against dollar to 1.1140, the weakest level since May 31. It has already lost more than 0.5 percent the previous session and tumbled nearly 0.7 percent so far this week.

The euro's decline accelerated ahead of the ECB's monetary policy meeting on Thursday. While markets have lowered their expectations of interest rate cuts, they still expect cautious guidance, paving the way for easing in September.

IHS Markit data released on Wednesday signaled a sharp contraction in euro area manufacturing activity to 46.4, a 79-month low, down from a reading of 47.6 in June.

Markit predicted that euro area economic growth would slow down to 0.2 percent - or possibly as low as 0.1 percent – in the third quarter, weaker than median forecasts 0.3 percent expansion.

The downbeat figures raised anticipations the ECB may act on Thursday by slashing interest rates by 10 basis points and announced a second quantitative easing program.

After Boris Johnson won the contest to become the next Prime Minister in Britain, he has raised the specter of a no-deal Brexit, adding further downside pressure on the common currency.

Against the pound, the euro slumped to a low of 0.8905, the lowest since June 21, extending its drop from six-month high of 0.9050.

Meanwhile, the dollar index, which measures the performance of major six currencies, fell about 0.02 percent to 97.403, following a gain of 0.5 percent the previous session.

The dollar may also come under pressure amid rising bets the Fed would cut interest rates for the first time in a decade next week.

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