Euro: PMI resilience tempers stagflation fears – BNY

FXStreet Insights Team FXStreet

BNY’s Geoff Yu notes Eurozone PMIs have surprised to the upside, with the composite at an eight‑month high and services back in expansion, easing immediate stagflation worries. He stresses this is not a clear signal for further ECB tightening, as another rate hike could risk turning a tentative recovery into a policy-driven slowdown for the Euro and regional assets.

Stronger PMIs but ECB caution

"Growth defies gloom: Europe’s latest PMIs have generally surprised to the upside, pushing back against immediate stagflation fears. That resilience is welcome, but it is not a clean invitation for the ECB to tighten again. Another hike risks turning a nascent recovery into a policy-induced slowdown."

"Eurozone composite PMI came in at 52.0 points in July, up from 50.0 in June, marking an eight-month high and a return to modest private sector growth at the start of Q3. The services PMI also rose into expansion territory at 51.7 from 49.4, ending a three-month downtrend."

"Output and new orders increased at the fastest pace since last November, with Germany, Italy and Spain all improving, while France remained in contraction. The survey pointed to softer inflationary pressures, as both input costs and output charges eased further."

"Germany’s services PMI reading for July was 49.8 points, up from 48.6 in June, indicating that activity fell only fractionally and moved closer to stabilization. The survey showed the first marginal rise in new business in five months, while export demand continued to decline, though at a slower pace."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD stays weak above 0.6900 after China’s trade data

AUD/USD struggles to capitalize on the previous day’s recovery and stays defensive on the 0.6900 level following the narrowing of trade surplus in China. Increased December Fed rate hike bets allows the US Dollar to pause its decline and weigh on the pair. US CPI data is next of note for the major.

USD/JPY retakes 158.00 on weak Japanese data; focus shifts to US CPI

USD/JPY attracts some dip-buyers and retakes 158.00 in the Asian session on Tuesday as a fall in Japan’s Household Spending offsets hawkish BoJ Summary of Opinions, undermining the Japanese Yen. Moreover, Fed hike bets support the safe-haven US Dollar and the currency pair. The market focus now shifts to the release of the crucial US CPI report.

Gold sticks to modest losses amid Fed hike bets; holds above $4,100 ahead of US CPI

Gold meets fresh supply, eroding a part of the previous day's strong gains to the $4,150 resistance zone, albeit it holds above the $4,100 mark heading into the European session. Firming US Federal Reserve rate-hike expectations turn out to be a key factor driving flows away from the non-yielding bullion. Meanwhile, the US Dollar struggles to lure buyers amid mixed signals regarding the state of diplomatic talks between the US and Iran, offering some support to the commodity as traders seem hesitant ahead of US consumer inflation figures.

Bitcoin hits lowest weekly close since August as short-term holders slip into losses

Bitcoin fell below $75,000 on Tuesday, after recording its lowest weekly close since August as selling pressure pushed recent buyers into losses.

This weeks’ two big inflation reports will offer perspective

Payrolls on Friday surprised with a big gain, 165,000 new jobs rather than the 65,000 forecast. Also the unemployment rate fell from 4.2% to 4.1% although average hourly earnings are up only 0.4% ($32.75). This weeks’ two big inflation reports will offer perspective. Tomorrow it’s CPI and on Friday, which is a Friday the 13th, it’s PPI.

Gold reclaimed $4,100. Tuesday’s CPI test decides if it holds

Gold (XAU/USD) starts the week on a positive note, reclaiming the $4,100 psychological level as the US Dollar (USD) retreats from its recent highs. The precious metal recovers from Friday's losses, although investors remain cautious ahead of Tuesday's US Consumer Price Index (CPI) report, which could determine the next direction for Bullion.