The euro felt the full force of ‘risk off’ sentiment overnight, falling to a low of 1.3425 in early European trade following the dire European PMI reports.
Eurozone manufacturing PMI for September was 48.4, lower than expectations of 48.5, while the service sector PMI came in at 49.1, weaker than expectations of 51.0. These did little to improve sentiment, and despite a modest rebound into US trade, participants quickly turned bearish, seeing the common currency plunge to 1.3384 as selling in risk assets and currencies peaked. As the session developed, news that the EU was looking to accelerate a bank recapitalisation program saw EUR/USD pare earlier losses to eventually close the session at 1.3459. In Asian trade, the euro has rebounded a little on the back of a bit of short covering, and was last at 1.3530.