Nervousness over banks sends euro 1% lower despite PMI

Shafaq News/ The euro fell sharply against a strengthening dollar on Friday amid nervousness over banks, with better-than expected economic data failing to lift sentiment.

Flash Purchasing Managers' Index (PMI) data failed to lift the single currency as sentiment in markets were fragile with European banks (.SX7P) falling 5.3%.

S&P Global's flash Composite Purchasing Managers' Index (PMI), seen as a good gauge of overall economic health, bounced to a 10-month high of 54.1 in March from February's 52.0, data showed on Friday.

That was well above the 50 mark separating growth from contraction and above all forecasts in a Reuters poll.

"The euro had already plunged below the $1.08 support line before the composite euro zone PMI data were released this morning," said Jane Foley, Head of FX Strategy at Rabobank London.

"The data were better than expected, but the mood in the market is risk aversion which is supporting another move back to the safe haven dollar," she added.

Fuelling concerns about the overall stability of Europe's banks, Deutsche Bank shares (DBKGn.DE) fell 14%.

The euro sank 1% to $1.0722. The dollar index, which measures the currency against six major rivals, rose 0.6% at 103.26.

Risk aversion also sent sterling 0.6% lower to $1.2209, despite data showing the British economy was set to grow in the first quarter and confidence was growing.

The pound touched a seven-week high of $1.2341 on Thursday in volatile trading after the Bank of England raised interest rates by 25 bps, but said a surprise resurgence in inflation would probably fade fast, stoking speculation it had ended its run of hikes.

The Fed on Wednesday raised interest rates by 25 basis points, as expected, but took a cautious stance on the outlook because of banking sector turmoil even as Fed Chair Jerome Powell kept the door open on further rate increases if necessary.

(Reuters)