The euro fell to a nearly two-month low against the dollar as data on Wednesday signaled the resurgence of Covid-19 is hurting the bloc’s economic recovery as services fell into contraction territory for the first time in three months.
EUR/USD fell 0.26% to $1.1676, to remain near lows of the day of $1.1664.
The IHS Markit flash eurozone purchasing managers’ index for services fell to 47.6 in September, from 50.5 in the previous month, data published on Wednesday showed. It was the first time in three months that the reading had dropped below a reading of 50, signifying a contraction, and was the lowest level since May.
“The second wave of corona infections in many euro countries appears to be slowing down the recovery in the services sector,” Commerzbank said, pointing to a recent report showing weakened activity in the eurozone.
Some of the eurozone’s biggest economies have seen a steady rise in cases over the past two weeks, with Spain, France and the Netherlands among the countries feared to be dealing with a second wave of infection. The Netherlands reported that infections hit a record high on Wednesday, with 2,357 confirmed over the previous 24 hours.
Eurozone manufacturing activity improved, however, rising to a reading of 53.7, its highest in two years. But against the backdrop of rising coronavirus infection, governments may be forced to impose tighter restrictions that could stall the pick-up in manufacturing.
“Given the increased number of cities being subject to tighter restrictions in an attempt to contain the spread of Covid-19, there is certainly the risk of a further weakening in services in the coming quarter, which might in due course take its toll on the manufacturing sector too,” Daiwa said.