Euro foreign exchange rate falls further as latest business data shows grim picture

The euro’s foreign exchange rate fell at open this morning and continues to follow a sliding trend lower as shrinking order books and rising job losses in Europe affected both manufacturing and service sector business, whilst elections in France and debt problems for Spain weighed on the currency.

In the European foreign exchange market, the euro was weaker against the US dollar. The euro was recently trading at $1.3180, from $1.3215 late Friday in New York. against UK sterling, the euro hits a new 12 month low of 1.224 euro.

French Elections

“The euro will have to contend with political events as it digests the aftermath of the first round of the French presidential elections. The fact that the political process will continue to a second round on 6 May could act as a constraint on the euro,” said Crédit Agricole Corporate & Investment Bank.

The euro and the dollar exchange rate “will largely remain within its recent range although developments in Spain and Italy and their debt markets will have the potential to invoke larger moves in the euro,” it added.

European Business Data

April’s PMI for the euro zone’s dominant service sector fell to 47.9 from 49.2 in March – a five-month low and worse than any forecast in a poll of more than 40 economists which projected a rise to 49.3.

The services PMI slipped further below the 50 threshold that divides growth from contraction in April, while factories endured their worst month since June 2009.

“We were saying last month that we probably had a second consecutive quarter of decline (in business activity), making a recession – now that’s extending into a third quarter,” said Chris Williamson, chief economist at PMI compiler Markit.

Order books brought no joy for services companies in April, with the services new business index slumping to a six-month low of 45.4, from 47.6.

“There are no real drivers of growth here, which suggests that although the overall rate of decline is modest at the moment, we could see it continue to worsen in coming months.”

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Euro foreign exchange rate falls further as latest business data shows grim picture