- Eurozone manufacturing PMI fell in July, below forecast of 46.1.
- The bloc’s services PMI fell to 51.9 in July versus 53.0 expected.
- EUR/USD remains in the red below 1.0850 following German and Eurozone PMI data.
He Eurozone manufacturing sector extended its contraction while service sector activity lost its recovery momentum in July, according to data from the latest HCOB Purchasing Managers’ Index (PMI) Survey released on Wednesday.
The Eurozone Manufacturing Purchasing Managers’ Index (PMI) fell from 45.8 in June to 45.6 in July, missing the market consensus of 46.1. The index slid to a seven-month low.
The bloc’s services PMI declined from 52.8 in June to 51.9 in July. The data missed expectations of 53.0 and hit a four-month low.
The Eurozone HCOB Composite PMI declined to 50.1 in July from 51.1 expected and 50.9 in June. The index hit a five-month low.
EUR/USD reaction to Eurozone PMI data
EUR/USD remains in the red near 1.0830 following disappointing Eurozone PMIs. The pair is losing 0.22% on the day at the time of publication.
Euro FAQs
The Euro is the currency of the 20 European Union countries that belong to the Eurozone. It is the second most traded currency in the world, behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily volume of over $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB), based in Frankfurt, Germany, is the reserve bank of the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s main mandate is to maintain price stability, which means controlling inflation or stimulating growth. Its main instrument is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher rates – generally benefit the Euro and vice versa. The Governing Council of the ECB takes monetary policy decisions at meetings held eight times a year. Decisions are taken by the heads of the national banks of the Eurozone and six permanent members, including ECB President Christine Lagarde.
Eurozone inflation data, as measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric data point for the euro. If inflation rises more than expected, especially if it exceeds the ECB’s 2% target, the ECB is forced to raise interest rates to bring inflation back under control. Relatively high interest rates compared to their peers usually benefit the euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases measure the health of the economy and can influence the Euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the Euro. Conversely, if economic data is weak, the Euro is likely to fall. Economic data from the four largest Eurozone economies (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone economy.
Another important output for the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period. If a country produces highly sought-after export products, its currency will appreciate due to the additional demand created by foreign buyers who wish to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
