EUR/USD hits session lows after EZ PMI data

The euro fell to session lows against the dollar on Monday after data showed that manufacturing output in the euro zone was weaker than expected this month, but this was offset by an improvement in service sector activity.

EUR/USD hit 1.3509 during European morning trade, the session low; the pair subsequently consolidated at 1.3516, dipping 0.05%.

The pair was likely to find near-term support at 1.3500 and resistance at 1.3546, the session high.

Data released on Monday showed that the preliminary reading of the euro zone manufacturing purchasing managers’ index fell to 51.1 in September from a final reading of 51.4 in August. Analysts had expected the index to inch up to 51.8.

However, the euro zone services PMI rose to 52.1, the highest level since June 2011, from 50.7 in August and above expectations for a reading of 51.1. 

Germany’s manufacturing PMI fell to 51.3 in September from a final reading of 51.8 in August, compared to expectations for an improvement to 52.2. 

The German services PMI rose to a seven month high of 54.4 from a reading of 52.8 in August. Analysts had expected the index to tick up to 53.1

A separate report showed that manufacturing activity in France contracted at the fastest pace in three months in September, while activity in the services sector expanded for the first time in 19 months.

The euro remained supported after German Chancellor Merkel's conservative party won general elections on Sunday, securing her a historic third term in office. Political party leaders were due to meet later Monday to discuss coalition talks.

The dollar remained under pressure as uncertainty over the direction of Federal Reserve policy persisted, following last week’s surprise decision to announce no reduction to its USD85 billion-a-month stimulus program.

The Fed said it wanted to see more evidence of a sustained economic recovery before it adjusted the scale of its bond buying program.

The single currency fell to session lows against the pound and the yen, with EUR/GBP down 0.31% to 0.8422 and EUR/JPY falling 0.43% to 133.78.

European Central Bank President Mario Draghi was to testify about the economy before the Committee on Economic and Monetary Affairs in Brussels later Monday.