Euro Weakens Amid Soft French Inflation Data

The euro was lower against its major counterparts in the European session on Wednesday, after a data showed that French inflation slowed more than expected in May.

Consumer prices rose 5.1 percent year-over-year in May, following a 5.9 percent increase in the previous month. Economists had expected an increase of 5.5 percent.

On a monthly basis, the CPI fell 0.1 percent in May, after a 0.6 percent increase in April. Economists had expected a 0.3 percent rise.

European shares dropped as China manufacturing data disappointed and caution crept in ahead of a vote in Congress to raise the U.S. debt ceiling.

Official data released earlier today showed China's factory activity contracted faster than expected in May on weakening demand, adding to concerns over the nation's wobbly economic recovery.

Sino-U.S. tensions remained on investors' radar after China declined a U.S. request for the countries' defense chiefs to meet this week.

The euro fell to a 5-1/2-month low of 0.8625 against the pound, more than 2-month low of 1.0658 against the greenback and a 1-week low of 148.85 against the yen, off its early highs of 0.8649, 1.0735 and 150.10, respectively. The next possible support for the currency is seen around 0.84 against the pound, 1.035 against the greenback and 143.00 against the yen.

The euro eased to 1.4539 against the loonie and 1.7757 against the kiwi, from an early high of 1.4611 and a multi-week high of 1.7837, respectively. The euro may locate support around 1.42 against the loonie and 1.72 against the kiwi.

The euro fell back to 0.9711 against the franc, reversing from an early 1-week high of 0.9732. The currency is seen finding support around the 0.95 level.

The euro held steady against the aussie, after pulling back from a 5-day high of 1.6508 it touched in the Asian session. The pair had closed yesterday's deals at 1.6464.

Looking ahead, Germany's preliminary inflation data for May, Canada GDP data for the first quarter, U.S. Chicago PMI for May, U.S. Dallas Fed services index for May and U.S. Federal Reserve Beige book report are due in the New York session.