By Tommy Wilkes
LONDON, Oct 24 – The euro skidded to its weakest since Aug. 20 on Wednesday after signs that economic growth could be slowing in Germany and France, the euro zone’s two biggest economies.
German private-sector growth slowed to its lowest level in more than three years as manufacturing and services both lost momentum, below forecasts, while manufacturing in France hit a 25-month low, widely-watched surveys showed.
The single currency, earlier trading flat, dropped 0.4 percent to $1.1422 after the surveys were published.
The euro was the only big mover, with broader currency markets treading water as investors stay nervous about which direction to take despite some calm coming back into the market after this week’s sharp falls in equity prices.
The Japanese yen – often bought when broader markets slide – gave up some of its earlier gains, suggesting renewed demand for risk-taking as Asian stock markets rebounded.
Big falls in stock prices have shaken foreign exchange markets this week, with the yen the main gainer, although currencies have largely remained calm as investors weigh up whether equity weakness is a major correction or just another wobble in a nearly decade-long bull-market run.
The S&P 500 is on course for its worst performance since at least August 2015.
Worries about a deepening row between the European Union and Italy over Rome’s budget plans, fears about ebbing world growth, global trade wars and political tensions between Saudi Arabia and the West have combined to rattle investor nerves.
“There are good reasons why you would want to be cautious,” said Simon Derrick, chief currency strategist at BNY Mellon, citing the Italian budget standoff and U.S. President Donald Trump’s latest criticism of the Federal Reserve over interest rate rises.
“All of these things support a market that is going to remain risk off.”
The yen edged lower to 112.48 yen per dollar, but remains almost two percent up since Oct. 4.
The dollar index, which measures the greenback against major currencies, was unchanged at 95.927.
In an interview to The Wall Street Journal, U.S. President Donald Trump escalated his attacks on Federal Reserve Chairman Jerome Powell, saying the head of the nation´s central bank threatened U.S. economic growth by raising interest rates. https://on.wsj.com/2yXGDPA
However, traders did not seem to react to this news in the Asian trading session.
“The Fed has maintained that strong US economic data justifies continued gradual Fed tightening,” said Mayank Mishra, global macro strategist at Standard Chartered.
Sterling fell 0.2 percent to $1.2959, near 2-1/2 week lows of $1.2937 touched on Tuesday, ahead of Prime Minister Theresa May’s meeting with her party’s so-called “1922 Committee” of backbenchers as she tries to calm lawmakers restive over her Brexit plans.
The Canadian dollar was flat at C$1.3084 to the U.S. dollar ahead of an expected Bank of Canada interest rate hike later on Wednesday.
The Australian dollar rose 0.1 percent to $0.7096, supported by improved sentiment in Asia, Australia’s key export markets. (Additional reporting by Vatsal Srivastava in Singapore Editing by Andrew Heavens)