Analysis / ECB / Finance / forex

Dollar Pushes Higher Against Euro

One Pound
The pound fell sharply against the dollar on Friday, dropping to one-week lows after data showing that growth in the U.K. manufacturing sector slowed sharply in March. GBP/USD was at 1.5137 late Friday, down 1.39% on the day. Sterling sold off after research group Markit said its manufacturing purchasing managers’ index fell to a seven-month low of 51.9 in April, from 54.6 in March. Economists had forecast an increase to 52.0. Output, new orders and employment all slowed the report said, with job creation in the sector the slowest in almost two years. The report came after data earlier in the week showed that Britain’s economy grew just 0.3% in the first quarter of this year, half the rate of the previous quarter.

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In the euro zone, data released earlier in the day showed that growth in the manufacturing sector eased slightly in April, but indicated that the economic recovery remains on track. The final reading of the euro area manufacturing purchasing managers’ index came in at 52.0, revised up from the preliminary reading of 51.9 but below March’s 10-month high of 52.2. A reading below 50.0 indicates activity is declining, while a reading above that level implies it is increasing. Manufacturing activity continued to be uneven across the euro zone. Germany’s manufacturing index ticked down to 52.1 from an 11-month high of 52.8 in March, while the French factory sector remained in contraction territory for the 12th straight month. “The dip in the rate of expansion will serve to check recent optimism that the ECB’s quantitative easing program has bought a guaranteed ticket to recovery,” said Markit’s Chief Economist Chris Williamson. The ECB launched a trillion-euro stimulus program in March and recent economic reports indicated that the recovery in the region was already gaining traction as a result. The euro was also lower against the yen and the pound, with EUR/JPY down 0.51and EUR/GBP losing 0.25%.

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The dollar rose slightly against the euro on Monday extending gains from late last week, amid stronger than expected U.S. factory order data. The euro fell 0.0051 or 0.46% to 1.1148 on Monday in U.S. afternoon trading, as the dollar posted mild gains against its European counterpart for the third consecutive session. The pair peaked at a session-high of 1.1224 in European morning trading, before falling to a daily low of 1.1122 on a choppy day of trading. EUR/USD had been in a holding pattern between 1.05 and 1.10 since mid-March until the euro rallied significantly against the dollar early last week. The pair likely gained support at 1.0858 the low from April 28 and met resistance at 1.1291 the high from May 1. On Monday, the U.S. Census Bureau said in a monthly report that factory orders for the month of April soared 2.1%, above estimates of a 2.0% gain. Bolstered by a surge in aircraft, motor vehicle and energy equipment orders, the reading posted its first gain in eight months. In March, U.S. factory orders fell slightly by 0.1%, underscoring crashing oil prices and a dip in exports due to the stronger dollar.

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