The euro zone's business activity contracted in August, reaching its lowest level since November 2020, raising concerns about the region's economic growth and leading to speculation about the European Central Bank's next steps.
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.
Weak European data caused the euro to decline and led to a rise in bond and share markets, while investors awaited Nvidia's results to assess the viability of the tech sector's high valuations.
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.
Euro zone growth is weaker than predicted, but the need for more rate hikes by the European Central Bank is not automatically voided, according to ECB board member Isabel Schnabel, who raised concerns about investors undoing the ECB's past work and the decline in real risk-free rates counteracting efforts to bring inflation back to target.
Euro zone inflation holds steady in August, but underlying price growth falls, complicating decisions for the European Central Bank as it considers a pause in rate hikes amid a slowdown in economic growth.
The euro weakened following comments from ECB rate-setter Isabel Schnabel, raising uncertainty about whether interest rates will be raised in September.
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.
European shares fall to one-week lows due to weak China and euro zone data, as concerns over slowing global growth increase.
European stocks continue to decline due to weak German data and elevated oil prices, raising concerns about stagflation in the euro area.
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.
European stock markets weakened on Thursday due to signs of slowing growth in Europe and China, as well as concerns about future Federal Reserve tightening. German industrial production fell more than expected, adding to the struggles of the eurozone's largest economy. China's exports and imports also fell in August, indicating continued pressure on its manufacturing sector. Additionally, stronger-than-expected US inflation data raised concerns about sticky inflation. Oil prices fell as signs of slowing Chinese growth overshadowed a draw in US inventories.
The U.S. dollar's share in global reserves has fallen below 60% for the first time in decades, as other currencies like the Euro, Pound, and Yen are on the rise due to a growing number of countries settling trade in their national currencies, driven by the de-dollarization process initiated by BRICS to end reliance on the U.S. dollar.
The US dollar's strength in the foreign exchange market, along with discussions of de-dollarization, highlights the divergence between the US and other major economies. The Dollar Index is on an eight-week rally, reaching a record high in international payments, while the euro's share has declined to a record low. In the week ahead, the US CPI and the ECB meeting are expected to be major events, with the US showing signs of inflation and weaker demand, and the euro facing challenges amid stagnation and inflation. China's CPI and PPI have shown some improvement, but the focus will be on yuan loans and real sector data. The eurozone's focus will be on the possibility of a rate hike by the ECB and the release of July industrial production figures. Japan's household consumption continues to fall, and the country may experience a contraction in Q3. The UK will release employment data and GDP details, while Canada will see data on existing home sales and the CPI. Australia will release its August employment data, and Mexico's peso positions may continue to adjust due to the winding down of the currency forward hedging facility.
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 European Central Bank's decision to signal its last rate hike has further weakened the euro, causing hedge funds and speculators to anticipate potential parity with 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.
European markets rise as global investors await the U.S. Federal Reserve's monetary policy decision; retail stocks lead gains while oil and gas dip slightly, and U.K. inflation falls below expectations in August.
