NEW YORK :The euro dropped against the dollar on Monday as business activity reports for the euro zone economy disappointed, briefly extending declines after U.S. data showed activity there held steady, and ahead of a flurry of Federal Reserve speakers this week.
The soft euro zone data supported expectations for more interest rate cuts by the European Central Bank this year, with markets currently pricing in a roughly 77 per cent chance for a cut of at least 25 basis points (bps) at the central bank’s October meeting.
A survey compiled by S&P Global showed euro zone business activity sharply contracted this month as the bloc’s dominant services industry flat-lined, while a downturn in manufacturing accelerated.
The contractions appeared broad-based, with Germany’s decline deepening, while France returned to contraction following August’s boost from the Olympic Games.
In contrast, U.S. business activity was steady in September, but average prices charged for goods and services rose at the fastest pace in six months, possibly pointing to an acceleration in inflation in coming months.
The data comes after the Federal Reserve cut rates by an outsized 50 basis point cut last week, which several officials commented on Monday that the move was intended to sustain an emerging and healthy balance in the economy.
S&P Global said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, was little changed at 54.4 this month compared to a final figure of 54.6 in August, with a reading above 50 signaling expansion.
The dollar index, which tracks its performance against a basket of currencies, including the yen and the euro, rose 0.05 per cent to 100.83 after rising as high as 101.23 on the session. The euro was down 0.39 per cent at $1.112 and on track for its biggest daily decline since Sept. 9.