The common European currency dropped by a significant amount as trading kicked off on Tuesday morning in the midst of a number of worrying data releases.
The Eurozone’s latest Purchasing Managers’ Index (PMI) information, which monitors how the service and manufacturing industries are performing, is coming out today.
The market is expecting an overall decline following the release of similarly negative data from France.
As a result, the Euro was down by 0.3% in London against the dollar at $1.1654.
This is a fast turnaround for the EUR/USD pair, which scaled two-week heights yesterday by reaching $1.1750.
Analysts believe that part of the nervousness around the PMI data comes from its link to the ongoing trade issues caused by the USA. The country has placed a range of fees on imports from markets like China and the Eurozone, and there is speculation it will take this further.
Recently, US President Donald Trump said that he was willing to impose even more sanctions on Chinese imports – a move that could in theory be extended to Europe.
In Asia there was further bad news for the forex markets across Monday and into Tuesday’s session.
A significant decision from the Bank of Japan on whether or not to inject some stimulus into the economy is coming next week following a policy meeting.
Although there is some hope within the markets that the central bank will press ahead with certain alterations to the way that stock is bought and the way in which targets for interest rates are calculated, it’s now considered less likely that this will occur.
As a consequence, the JPY/EBS failed to rise against the dollar and sat at 111.21, although it did manage to perform a little better in its Euro and pound pairs.
Across the sea in China, the offshore yuan dropped to 6.8448 for each dollar – its lowest point in over a year. This came after markets began to suspect that monetary conditions in the country were about to become a little looser.
Looking ahead, there’s plenty to keep the forex markets busy for the rest of this week.
Wednesday sees a number of significant European data releases. The June mortgage approvals rate in the UK will be revealed at 8.30am GMT, while a range of house-related data comes out of the USA later in the day. Month-on-month home sale changes will be released at 2pm GMT following publication of mortgage application rate data at 11am.
On Thursday, the European Central Bank will release its interest rate decision at 11.45am GMT. A range of other business indicators will come out of the Eurozone on Thursday, including an Italian business confidence survey and consumer confidence surveys in France, Germany and elsewhere.
Across the Atlantic, Thursday will see the release of continuing and initial jobless claims in the USA.
And on Friday, releases of year-on-year house price data in the UK and quarter-on-quarter gross domestic product changes in France will round out the week.