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- The purchasing managers’ index stood at 48.1 in November, compared to 50 in September
- The data caused the euro to fall to just over $1.03 against the dollar
- This is its lowest level since November 2022
The euro sank to its lowest level in two years against the dollar yesterday as political turmoil in Germany and France set back the single currency zone’s economy.
A closely watched monthly survey of business activity unexpectedly fell to 48.1 in November, down from 50 in September, in an index where the 50 mark separates growth from contraction.
The Purchasing Managers’ Index (PMI) data saw the euro fall to just over $1.03 against the U.S. currency, its lowest level since November 2022.
Eurozone government bond yields also fell as investors bet on faster interest rate cuts. The European Central Bank has cut rates three times this year to 3.25 percent amid deepening concerns about lackluster growth.
Markets expect another quarter-point cut next month, followed by further reductions that will take the rate to 1.75 percent by the end of 2025.
Jane Foley, senior currency strategist at Rabobank, said the euro had taken “one more step towards parity” with the dollar.
Struggle: Purchasing Managers’ Index data sent the euro tumbling to just over $1.03 against the U.S. currency, its lowest level since November 2022.
However, there was little change against the pound, after PMI data for the UK also proved disappointing, as Labour’s tax raid on employers in the budget took its toll. The pound sterling was trading at just over 1.20 euros.
Eurozone PMI figures showed the services sector was declining for the first time in ten months and the decline in the manufacturing sector was deepening.
Germany, Europe’s largest economy, is in limbo after its coalition government collapsed this month, and elections are not scheduled until February. Meanwhile, yesterday’s revised figures lowered third-quarter growth from 0.2 percent to 0.1 percent.
The country, once a manufacturing powerhouse, is in crisis as demand from China falls and its vast auto industry struggles with the transition to electric vehicles.
Bosch yesterday became the latest industrial giant to be affected, announcing 3,500 layoffs, affecting the part of the company that develops vehicle technology.
US carmaker Ford is also cutting thousands of jobs in Germany, while Volkswagen, Europe’s largest carmaker, is expected to close up to three factories.
In France, far-right lawmakers are threatening to topple Prime Minister Michel Barnier’s fragile coalition in a dispute over the 2025 budget.
Adding to the pessimism is the fear that Donald Trump’s threats of trade tariffs will harm the European economy.
Cyrus de la Rubia, chief economist at the Commercial Bank of Hamburg, which compiled the PMI figures, said: “Things could hardly have turned out much worse.” The manufacturing sector is sinking deeper into recession and now the services sector is starting to struggle after two months of marginal growth.
‘It is no surprise, given the political chaos that has been experienced lately in the largest economies of the eurozone.
‘France’s government is on shaky ground and Germany is heading for early elections. Add to that the election of Donald Trump, and it’s no wonder the economy is facing challenges.”
Bert Colijn, chief economist at ING Bank, said: “The November PMI is another wake-up call for eurozone policymakers that the economy continues to show signs of weakness.”
“New business is weakening again in the manufacturing and services sector, with export orders in particular falling sharply as the eurozone economy struggles with weak demand from abroad.”
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