The euro, which hit two-year highs against the dollar this week, fell Friday as data showed eurozone economic activity slowing in August against a backdrop of rising coronavirus cases.
The pound also fell against the dollar as the EU and Britain traded blame for the lack of progress after the latest round of post-Brexit trade talks, with Brussels warning that a deal looked unlikely.
Sterling is being punished "by Brexit talks which seem to be going nowhere," said Neil Wilson, analyst at Markets.com.
"The two sides are still far from reaching agreement on key terms" of their post-Brexit relationship.
In the eurozone, IHS Markit's closely-watched PMI index fell to 51.6 points from 54.9 points in July, although that was still above the key level of 50 points that indicates growth.
"The euro's rally has come to a halt this week on growing concerns that coronavirus is coming back strongly in parts of Europe and will hurt the economic recovery," said Fawad Razaqzada, market analyst with ThinkMarkets.
"In fact, economic activity has already slowed down according to the latest Purchasing Managers' Indices from Germany and especially France, where COVID-19 cases have risen sharply since July."
European stock markets were in the red in afternoon trading, with London's FTSE falling 0.5 percent, Frankfurt's DAX 30 shedding 0.9 percent and Paris's CAC 40 down 1.0 percent.
On the other side of the Atlantic, Wall Street opened in slightly negative territory as investors took profit from sharp gains this week.
While vast central bank support has helped fan a surge in equities globally, economic data showed that 1.1 million Americans made new claims for unemployment benefits last week, reinforcing concerns about the world's biggest economy.
However, observers said the reading could give warring lawmakers in Washington the kick-start they need to agree a new rescue package, having failed to reach a consensus after two weeks.
- Vaccine hopes –
There is some optimism nevertheless that a vaccine can be found.
Pfizer and BioNTech SE said a vaccine they are working on could be up for regulatory review by October and, if all goes well, the jab could be ready to roll out as soon as November.
While massive financial support from central banks and governments has been crucial to helping economies, a vaccine for a disease that has killed nearly 800,000 people and infected more than 22 million is seen as paramount.
The vaccine news "has raised some expectation... that life around the world could return to normal sooner than expected", said AxiCorp's Stephen Innes.
"This is not only good for market concerns, this is a world desperately anxious for a cure to put an end to the most severe global recession since the 1930s," Innes said.
"From a stock market concern, it's great for growth assets as planes will fly, the oil will flow, and laggard industries will emerge from the COVID-19 fog and their stocks will soar."
AFP
