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Euro Tumbles Follow Weak Data

David Becker
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Euro Tumbles Follow Weak Data

The Euro continued to fall following Thursday’s ECB meeting were Mario Draghi commented on the level of the European currency. The currency pair is under fresh pressure, breaching yesterday’s 1.3596 low and clocking a new one-week low of 1.3587. The pair is once again declining concomitantly with a fresh widening in T-note v Bund yield differentials, which has pressed to a new cycle wide toward 137 basis points, now over 10 basis points up on levels seen earlier in the week. The failed breach of the 200-day moving average this week and the subsequent breach of support at 1.3600-05, which encompassed the 20-day moving average at 1.3604, has reaffirmed strongly bearish technicals.

German construction PMI fell to 45.5 in June from 48.1 in the previous month. This was the sharpest decline in 15 months and suggests a broad based contraction in building activity in the Eurozone’s largest economy. At the same time, demand remains fuelled by the low interest rate environment, which contributes to the uptick in house prices across Germany, with the Bundesbank warning that property in the large centers is considerably overvalued.

Eurozone Retail PMI rose to 50 in June, from 49.9 in May. The improvement means that sales are no longer contracting, with the overall number boosted by a sharp rise in the German reading to 56.2 from 52.5 in the previous month. French and Italian retail PMIs meanwhile fell back and are firmly in contraction territory.

German manufacturing orders dropped 1.7% m/m in May, more than expected, but with April data revised up to 3.4% year over year from 3.1% year over year. The annual rate dropped to a still very strong 5.5% year over year from 6.6% year over year in the previous month. The breakdown showed domestic orders down 2.5% month over month, while export orders dropped 2.3% month over month, despite the 5.7% month over month rise in orders from other Eurozone countries.

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