Search ForexCrunch

The purchasing managers’ index for Germany’s manufacturing sector dropped from 46.2 to 34 points, much lower than an expected rise to 47.1 points.

EUR/USD hits news 22 month lows on this news, that follows a similar French disappointment.

Germany’s services sector is doing better: it remained unchanged at 52.2 points. A score above 50 means growth, while a score below 50 means contraction.

The pair dropped below yesterday’s 1.2545 level and reached 1.2540, extending a slide from 1.2585 that began earlier.

It’s important to remember that purchasing managers’ indices are forward looking indicators, making them a great indicator. Germany grew quite strongly in Q1 2012 – by 0.5%. Its growth practically saved the euro-zone from entering an official recession. Thanks to Germany, GDP was flat in Q1. Q2 already looks different.

Earlier, French PMIs were a bitter disappointment. Manufacturing fell from 46.9 to 44.4, much worse than an expected rise to 47.1 points. The services sector saw its score unchanged at 45.2, also falling short of an expected rise to 45.8 points.

EUR/USD fell to a 22 month low yesterday, and consolidated between 1.2550 and 1.26. After that big break, we could see more falls now.

The figures for the whole continent will be published at 8:00 GMT, together with the highly regarded German Ifo Business Climate indicator.

For more, see the Euro USD forecast.

Update: IFO badly disappointed, pushing the euro even lower.