Euro Slips on Weak PMI, Retail Sales

Euro drops below $1.45 on weak PMI & falling Ezone sales, partially hitting our targets in our Premium euro shorts. RBA downgraded 2011 outlook & China PMI came in soft.

UK services PMI edged up to 53.9 in June from a 3-month low of 53.8 in May. The figure surpassed consensus forecasts of 53.5. Yesterdays fairly positive June construction PMI data, on the face of it seemed a fairly positive number, raising expectations of a fairly good quarter for Q2.

Euro slipped off the $1.45 figure as Eurozone services PMI slowed for a third straight month in June, coming in worse than expected at 53.7 from May's 56.0. Euro was largely able to shrug off last weeks disappointing economic data and Greek volatility and Standard and Poors ratings downgrade warning for Greece has seen it able to hold in and around the 1.4500 level.

Eurozone retail sales fell 1.1% in May, more than reversing the revised 0.7% increase seen in April. The bulk of the decline from Germany.

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The Reserve Bank of Australia kept interest rates unchanged at 4.75%, no surprise really given the weakness of recent economic data in not only the jobs market, but also yesterdays disappointing retail sales data. The biggest surprise however was the bank's decision to downgrade its 2011 growth outlook citing supply chain disruptions from the Japanese earthquake and uncertainty as a result of Europe's sovereign debt crisis. This slight change of emphasis has altered perceptions of the need for a rise in interest rates in the near future making the AUD vulnerable to a downward correction.

Chinese PMI data has continued its recent softer tone with HSBC services June PMI data coming in at 54.1 , down from 54.3 in May, reinforcing fears of a slowdown in one of the worlds biggest consumer of commodities and raw materials.