The weak data "was a very big miss", said Westpac currency strategist Sean Callow in Sydney, adding that the market "went into it seemingly not ready for bad news." "It's probably going to reverberate for a little bit longer," he said, and then investors would shift to jobs data due on Friday to seek a broader read on the health of the world's biggest economy.
The dollar eased slightly against the euro to $1.0933 per euro and gave ground to the Australian and New Zealand dollars, retracing a bit of the large gains it made against them on Tuesday. The pound sank 0.2% against the dollar to $1.2280. It was headed back toward an almost one-month low plumbed overnight as traders are increasingly nervous about Britain crashing out of the European Union at the end of the month.
Prime Minister Boris Johnson will unveil his final Brexit offer to the European Union on Wednesday and make clear that Britain intends to leave the EU on Oct. 31, no matter what. The dollar also rose marginally against the yen, to 108.84 yen, but steadied against a basket of currencies at 99.159 while the manufacturing shock echoed through other markets, dragging bond yields and Asian stock markets lower.
The Australian dollar, which hit its lowest in a decade on Tuesday after the Reserve Bank of Australia (RBA) cut interest rates, bounced a little to $0.6716. But few are expecting a sustained rise after the statement accompanying the rate cut left room for further easing. In offshore trade, the Chinese yuan was steady at 7.1466 per dollar, with trade subdued as Chinese markets are closed until Monday for public holidays.