Investing.com - The euro fell to session lows against the dollar on Wednesday, re-approaching a two-year trough after data showed that factory activity in the euro area slowed to a 14-month low in September.
EUR/USD touched lows of 1.2585, not far from Tuesday’s two year trough of 1.2570, and was last down 0.22% to 1.2603.
The drop in the euro came after research group Markit reported that the final reading of the euro zone’s manufacturing purchasing managers index ticked down to 50.3 from 50.5 in August.
Economists had expected an unchanged reading.
The report said new orders fell for the first time since June 2013, while lower input and output prices added to concerns over a slowdown in inflation.
The German manufacturing PMI slid to 49.9 from 50.3 previously, falling below the 50 level that separates growth from contraction for the first time in 15 months.
The report came a day after data showed that the annual rate of euro area inflation fell to a five year low of 0.3% in September.
The European Central Bank targets an inflation rate of close to but just below 2%.
The weak data added to pressure on the ECB to implement additional stimulus measures to stave off the threat of deflation in the region, ahead of its monthly meeting on Thursday.
The ECB unexpectedly cut rates to record lows last month in a bid to shore up growth in the region.
The dollar has rallied against the euro and the yen in recent months, amid expectations that the Federal Reserve is growing closer to raising interest rates.
The dollar shrugged off data on Tuesday showed that U.S. consumer confidence fell in September and another report showing that house prices rose less-than-expected in July.
Investors were looking ahead to Friday’s nonfarm payrolls report amid expectations that it would show the U.S. economy added more than 200,000 jobs for a sixth successive month in August.
Elsewhere, the euro was steady against the pound, with EUR/GBP at 0.7788, not far from Tuesday’s two year lows of 0.7765.
In the U.K., data on Wednesday showed that output in the U.K. manufacturing sector slowed to a 17 month low in September.
The U.K. manufacturing PMI fell to 51.6 last month from 52.2 in August. Economists had expected the index to tick up to 52.5.
New orders slowed to near-stagnation the report said, while new export demand also declined, which Markit said was due to weakness in the euro area economy and the appreciation of sterling against the single currency.