The euro was smashed lower on Friday following the release of a weak set of European PMIs. In particular, French Services and Manufacturing PMI’s dropped below 50, signaling a contraction. The result seems to be partly due to the recent protests in Paris, which continue to weigh heavily on business sentiment. The composite PMI for the entire Eurozone also fell, but to 51.3, its lowest level since November 2014. According to reports on Friday, Italy and the EC are apparently still at loggerheads over the budget deficit target, which didn’t help the euro’s cause either.
Meanwhile, ECB rate hike expectations are slowly diminishing with money markets pricing in a 60% chance of a rate hike next calendar year, down from 75% late last week. This week’s data from the Eurozone will also likely impact these probabilities and traders will be looking to Final CPI (due today) and German Ifo Business Climate on Tuesday for more clues.