Euro drops to 7-month low as PMIs jump

The euro dropped to a seven-month low on Monday (November 23rd), as markets bet on more easing in Europe coming soon despite upbeat manufacturing and service sector data.

Eurozone businesses reported the fastest rates of growth in business activity and employment for four-and-a-half years in November, according to the latest purchasing managers' index (PMI) from Markit.

Chris Williamson, chief economist at the research group, said the data “shows a welcome acceleration of eurozone growth, putting the region on course for one of its best quarterly performances over the past four-and-a-half years”.

EUR/USD approached the 1.06 handle, a level not seen since April, with the prospect of additional stimulus being launched by the European Central Bank (ECB) early in December dampening demand for the single currency.

“However, with recent comments from ECB chief Mario Draghi highlighting how the central bank remains disappointed with the strength of the upturn at this stage of the recovery, November’s slightly improved PMI reading will no doubt do little to dissuade policymakers that more needs to be done at their December meeting to ensure stronger and more sustainable growth,” added Mr Williamson.

At the same time the dollar was trading higher versus its major peers after last week’s minutes from the Federal Reserve’s latest policy meeting suggested the central bank is close to raising rates next month.

The stronger dollar hit commodities, including oil, which slid to fresh lows. Copper sank to its lowest in six years and nickel plunged to its weakest since 2003.

Stocks were mixed, with the FTSE 100 down 0.3 per cent in the morning session as ming stocks and supermarkets were hit.

Rolls-Royce Holdings and BAE Systems were the biggest risers as the British government outlined plans to raise defence spending in the coming years. In Germany, the DAX was down 0.15 per cent, while in France the CAC lost 0.5 per cent.