The Euro to USD exchange rate fell to a new three-month low on Friday after disappointing data out of Germany increased the likelihood that the European Central Bank will boost its stimulus measures at next month’s eagerly anticipated policy meeting.
The single currency was already under pressure from yesterday’s data which showed that the region’s manufacturing activity expanded at its slowest pace in three years.
Today’s data released by the Ifo institute showed that Germany’s business climate index slipped to 110.4 in May from the 111.2 recorded in April. Economists had been forecasting a fall to 110.9.
Also weighing upon the Euro was data out of Italy which showed that retail sales in the country fell more than expected in March.
According to the data sales fell by -0.2 month-on-month and by -3.5% year-on-year. The yearly decline was far worse than the previous month’s figure of -1.0%.
The monthly figure meanwhile was below expectations for an increase of 0.3%.
Also weighing on the Euro are concerns that Euro-sceptic parties are set to make strong gains at this week’s European elections.
The UK’s UKIP party has made strong gains in local council elections and is forecast to win the Euro election outright.
Results will be published on Sunday.
“The Euro is being sold as markets price in easing by the ECB next month. This week’s Euro elections add an additional risk, and the market will hedge against that, providing another source of Euro weakness,” said an economist from Mizuho Bank Ltd.
Against the GBP the Euro tumbled to its lowest level in 17-months as strong data out of the UK continued to support Sterling.
“Euro-Sterling is trading at some pretty important levels. It seems inevitable we are going to be heading down the 80.20/30 area in the next couple of weeks because of the likelihood of ECB easing as UK data resilience. We shouldn’t be too surprised to see downside risks continuing to play out in Euro-Sterling,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce.
The US Dollar is likely to make further gains against the Euro later in the session as today’s US new home sales data is expected to come in positively.
Euro Exchange Rate
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3622 ,
Euro,,British Pound,0.8091 ,
Euro,,Australian Dollar,1.4766 ,
Euro,,Canadian Dollar,1.4851 ,