|

Eurozone PMIs outperform expectations as greater defence spending in Germany feeds through

August's Eurozone PMI data slightly outperformed modest expectations. What particularly stands out is the contrast between the manufacturing sector, which seems to be catching some wind in its sails, and the services sector, where expansion was contained and identical to July.

While the impact of the US-Iran war still shapes the Eurozone's business activity, higher defence spending in Germany seems to be starting to show in the data, with broader tech-related demand also playing some role. We are cautiously optimistic about the outlook, especially since some of the challenges for businesses – like the extreme heat that has been particularly severe in the Eurozone's second-largest economy – are temporary. Stability in the Middle East and a normalisation of energy commodity prices would also help a number of businesses. 

EUR/USD was little changed after the readings, unsurprising given the composite data came in close to expectations. The data likely won't change much in the context of the ECB's upcoming interest rate decision. The Eurozone economy isn't firing on all cylinders, but growth above 1% suggests it's resilient enough that some further monetary policy tightening remains firmly on the table.

Author

Matthew Ryan, CFA

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

More from Matthew Ryan, CFA
Share:

Editor's Picks

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Has Bitcoin really escaped the macro forces it was built to fight?
Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?
The Euro is not the sick man of Europe. France's bond market is
EUR/USD remains under pressure, near the 17-month low of 1.1161 reached on Monday. The pair has lost more than 7% since its yearly peak, as concerns over France's public finances increasingly weigh on the single currency. But behind the weakness of the Euro (EUR), the problem does not necessarily lie with the European economy as a whole.
Has Bitcoin really escaped the macro forces it was built to fight?
Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?