Forex - EUR/USD plunges on Spanish worries, soft U.S. data

Investing.com - The euro moved sharply lower against the U.S. dollar Thursday, falling to a fresh session low after a flurry of soft U.S. data, while investors awaited the outcome of an audit of ailing Span’s banking system.

EUR/USD hit 1.2562 during U.S. afternoon trade, plunging 1.15%.

The pair was likely to find support at 1.2473, the low of June 13 and resistance at 1.2746, Monday’s high and a one-month high.

Market sentiment was hit after data showed that manufacturing activity in the Philadelphia-region contracted at the steepest rate since August this month, adding to concerns over the pace of the U.S. economic recovery.

The Federal Reserve Bank of Philadelphia said that its manufacturing index dropped by 10.8 points to minus 16.6 in June from May’s reading of minus 5.8.

Analysts had expected the index to rise by 7.1 points to 1.3 in June.

A separate report showed that U.S. existing home sales fell more-than-expected in May, falling by 1.5% to a seasonally adjusted 4.55 million units, outstripping expectations for a 1.1% decline to 4.57 million units.

Earlier Thursday, the U.S. Department of Labor said the number of people filing for initial jobless benefits fell by 2,000 to a seasonally adjusted 387,000 last week, disappointing expectations for a decline of 9,000 to 380,000.

The previous week’s figure was revised up to 389,000 from a previously reported 386,000.

In the euro zone, data showed that manufacturing activity in the region contracted at the fastest pace since June 2009 this month, with the purchasing managers’ index falling to 44.8, down from a final reading of 45.1 in May.

The euro zone’s services PMI ticked up to 46.8 from 46.7 in May, against expectations for a dip to 46.5, but remained well below the 50 level that separates contraction from expansion.

Manufacturing activity in Germany slowed to the lowest level in three years in June, as the ongoing euro zone crisis hit export demand.

The weak data came after a report showed that China’s HSBC PMI for June fell to 48.1 compared with 48.4 in May, remaining in contraction territory for the eighth straight month.

Investors remained wary ahead of the outcome of an audit of Spanish banks later in the day, amid concerns that the results could show that a EUR100 billion bailout for the country’s banks agreed earlier this month would not be large enough.

Spain’s Treasury sold slightly more than the targeted amount of EUR2 billion at an action of government debt earlier in the session, but the country’s borrowing costs rose sharply. 

The average yield on the five-year bond climbed to 6.07%, up from 4.96% at a similar auction last month.

The euro extended losses against the pound, with EUR/GBP giving back 0.45% to hit 0.8047 and erased gains against the yen, with EUR/JPY falling 0.45% to hit 100.62, off an earlier high of 101.62.

Later in the day, European Central Bank President Mario Draghi was to speak in Frankfurt.