Dollar climbs, euro weakens to two-year low after PMI data

By Chuck Mikolajczak

NEW YORK (Reuters) -The euro fell to a two-year low while the dollar gained on Friday after gauges of business activity were released in each region, while bitcoin again hit a record high as it continued its ascent towards the $100,000 mark.

HCOB’s preliminary composite euro zone Purchasing Managers’ Index, compiled by S&P Global, sank to a 10-month low of 48.1 in November, below the 50 level that marks expansion from contraction, and the 50.0 estimate.

In addition, Britain’s PMI fell to 49.9 in November, from 51.8 in October. The government’s plan to increase taxes on businesses contributed to the first contraction in private sector activity in over a year, adding to recent indications the economy was losing steam.

But in contrast, S&P Global said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to 55.3 this month, the highest level since April 2022, after a 54.1 reading in October, with the services sector proving the bulk of the increase.

“It highlights the two-track world. It’s U.S. versus the rest, but even within the US it’s services versus manufacturing,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.

How long can US services make up for the drag from everything else?

The dollar index, which measures the greenback against a basket of currencies, rose 0.42% to 107.51, with the euro down 0.54% at $1.0415 after falling to $1.0333, its lowest since Nov. 30, 2022. The greenback was on track for its third straight weekly advance.

Bitcoin continued its recent rally towards the $100,000 mark that has seen the cryptocurrency surge more than 40% since the U.S. election on expectations President-elect Donald Trump will loosen the regulatory environment for cryptocurrencies. Bitcoin was last up 0.35% at $98,428.

Investors have scaled back expectations for the path of rate cuts from the Federal Reserve recently, currently pricing in a 56.2% chance of a 25 basis point cut at the Fed’s December meeting, down from 69.5% a month ago, according to CME’s FedWatch Tool, as they assess the impact of legislative policies by the Trump administration, such as tariffs, on the economy.

Other central banks such as the European Central Bank (ECB) and Bank of England (BoE) are seen as likely to become more aggressive in cutting interest rates to buttress their economies.

Sterling weakened 0.44% to $1.2532 and was on track for its second straight weekly decline.

Some of the European Central Bank’s most influential policymakers urged the European Union to bring back long-stalled economic integration to protect its model of prosperity from a looming trade war with the United States.

Investors are waiting for Trump to name a Treasury secretary. The Wall Street Journal reported on Thursday that Trump floated the idea of appointing Kevin Warsh, a former member of the Fed’s board of governors, to the post, with the understanding that he could later become Fed chair.

Against the Japanese yen, the dollar strengthened 0.12% to 154.69. The yen had fallen below 156 per dollar last week for the first time since July, sparking the possibility that Japanese authorities may again take steps to shore it up.

Japan’s annual core inflation was 2.3% in October, keeping pressure on the central bank to raise its still-low interest rates.

Just over half of economists in a Reuters poll believe the Bank of Japan would hike in December, in part because of concerns about the depreciating yen in the midst of an improving economy.

(Reporting by Chuck MikolajczakEditing by Peter Graff)