German producer prices fell more than expected in July, marking their first decline in over two-and-a-half years, as easing energy prices raised hopes for a further decrease in inflation in Europe's largest economy.
Euro zone business activity declined more than expected in August, particularly in Germany, while some inflationary pressures returned, posing a challenge for the European Central Bank's efforts to control inflation without causing a recession.
The euro fell and bond and share markets bounced back as weak European data caused investors to anticipate Nvidia's results and Powell's Jackson Hole speech.
European bonds and stocks fell as inflation data suggested that inflation in the euro region may not be fully subsiding, while utilities led the decline in the Stoxx Europe 600 and the German and Spanish inflation data complicated the outlook for European policy makers.
The euro reached a 15-year high against the yen due to signs of inflation in Europe, while the dollar weakened ahead of economic data that could indicate a softening economy.
The US dollar dropped to a two-week low against the euro and other currencies after data revealed lower than expected private payroll growth in August, leading to speculation that the Federal Reserve will halt interest rate increases.
German inflation fell slightly in August, but economists predict that the downward trend will continue in the coming months, with food prices showing above-average growth.
The euro weakened following comments from ECB rate-setter Isabel Schnabel, raising uncertainty about whether interest rates will be raised in September.
Consumer prices in the eurozone rose 5.3% on average this month compared to last year, with core inflation easing to 5.3%, potentially increasing pressure on the European Central Bank to raise interest rates.
The euro rose against the dollar and euro zone bond yields fell after US unemployment rate increased, suggesting the Federal Reserve may be done with interest rate hikes.
Investor morale in the euro zone fell more than expected due to Germany's economic weakness, with the situation being described as "precarious" and potentially leading to a global recession.
European shares fall to one-week lows due to weak China and euro zone data, as concerns over slowing global growth increase.
Most Latin American currencies fell as the dollar strengthened on robust U.S. economic data, with the Mexican peso leading the declines, while Chile's peso gained after the central bank cut its benchmark interest rate and lowered its economic growth forecast for 2023.
The European Commission has revised down its economic forecast, citing high prices for goods and services as a significant factor, leading to reduced growth projections for the European Union and the eurozone. Germany is expected to experience a downturn, while inflation is projected to exceed the European Central Bank's target. Weak consumption, credit provisions, and natural disasters are also contributing to the loss of momentum in the economy. However, the report highlights the strength of the EU labor market with a low unemployment rate.
The euro has been continuously decreasing in value against the dollar for the eighth consecutive week, reflecting the economic challenges faced by Europe, including high inflation and the specter of recession, while the United States has better control over inflation and a stronger labor market, leading to a widening gap between the euro and the dollar.
The annual rate of inflation in the eurozone has been revised down to 5.2% for August, but it remains well above the European Central Bank's 2% objective despite a decrease in consumer prices.
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