EurUSD

Risk FX slipped lower on the first trading day of the week on raised investor concerns that Eurozone may now be facing its third consecutive quarter  of contraction in the wake of much weaker than expected flash PMI readings from the region. German combined flash PMI data for April missed its mark badly printing at 50.9 versus 51.6 in March  as the Manufacturing sector recorded its lowest reading in more than 33 months. German PMI Manufacturing came in at 46.3 versus forecasts of 49.0 as exports showed their steepest decline since last November. French data was weaker as well with both services and manufacturing data also missing estimates.
The weak PMI reports suggest that growth in core European economies is in peril undermining any expectations of a rebound to positive GDP in Q2 of this year. German composite PMI tends to be a strong leading indicator to overall GDP growth and as it teeters on the edge of the 50 boom/bust line it indicates that Europe’s leading economy main remain in recession for the near term. Overall EZ PMI printed at 47.4 – well below the key 50 level and considerably lower than 49.1 the month prior.
In short, the situation in the EZ points to further slowdown in economic activity and stands at sharp contrast to the IFO sentiment survey released last Friday. Historically the PMI data tends to lead  the IFO survey. Furthermore as additional austerity measures are implemented in Club Med countries, the deterioration in aggregate demand will only exacerbate putting further pressure on the core which could continue to inflame the region’s credit markets driving the EUR/USD lower as the summer proceeds.
Elsewhere, Australian PPI printed at -0.3% versus 0.5% indicating a significant slowdown in wholesale inflation. If the data is borne out by CPI readings due later tonight the RBA would face no further barriers towards easing rates at its next meeting in May. Australian monetary authorities have already hinted that their decision to lower rates would depend in easing of inflationary pressures and given tonight’s reports a 25 bp cut appears to be assured in May. Aussie slipped below 1.0300 as the prospect of  a rate cut and broad risk aversion flows weighed on the pair.
With no US data on the calendar today, the negative risk sentiment from Europe may extend into North American session today. If risk aversion flows accelerate EUR/USD is likely to drift lower testing support at the 1.3100 level as investor sentiment towards  the region continues to sour in wake of disappointing economic data. 

byfx360

Dollar and yen extend this week's recovery as sentiments were further weighed down by poor Eurozone data today, which suggests deeper and steeper contraction in Eurozone economies. Eurozone manufacturing PMI dropped to 46.0 in April, much worse than expectation of a rise to 48.1 and was the lowest number in 34 months. Eurozone services PMI dropped to a 47.9 versus expectation of 49.3, hitting a five month low. German PMI manufacturing dropped sharply to 46.3 versus expectation of 49.0, lowest since July 2009 even though services PMI unexpectedly improved to 52.6. France PMI manufacturing rose slightly less than expected to 47.3 but services PMI dropped from 50.1 to 46.3. Chief economist at Markit Chris Williamson said that the data "signaled a faster rate of economic contraction in the euro zone during April, extending what appears to be a double-dip recession into a third consecutive quarter."
French presidential election also weighed down sentiments. In the first round of France's presidential vote, current president Sarkozy came in second to Socialist Hollande. Hollande won 28.5% of vote while Sarkozy won 27.1%. A surprise in the market was that anti0immigrant Le Pen won 18.1% vote, a record for the party. The second round takes place on May 6. Hollande is having a slight upper hand and some analysts are cautious that certain policies that Hollande promotes would create friction with other major countries. A major concern is that Hollande has made himself clear that he will seek to renegotiate the fiscal pact agreed by EU leaders and shift the focus from austerity to growth.