Help
German business activity slumps, weighing on the euro
Expectations lean more towards the ECB maintaining rates
Both the manufacturing and services sectors in Germany contracted in August
The services sector in the Eurozone also missed
The Euro hit a 2-month low near 1.080
German business activity sees sharpest decline since May 2020
German business activity marks its sharpest contraction in over 3 years and while the German PMI dropped to its lowest point since May 2020 to 44.7 from 48.5 in July, Staying below 50 for the second consecutive month. Both the manufacturing and services sectors also saw a contraction, indicating the significant pressures Germany faces.
The services sector saw its first contraction in eight months, with the sector's reading falling to 47.3 from 52.3.
The Euro slips against most major currencies
The Euro dropped against most majors to hit lows of 1.080, government yields also fell after the release of the figures.
The consensus in the markets is that the ECB will halt hiking rates. This shift in outlook is largely influenced by the widespread contraction experienced across almost all sectors of the economy. The inability of these sectors to rebound in tandem with the frequency of rate hikes has prompted a division amongst expectations.
Whilst Inflation within the Eurozone remains steadfast at 5.5%, well above the bank’s target. the prevailing sentiment is divided. Approximately 55% of expectations lean towards maintaining interest rates at their current levels. On the other hand, around 40% of expectations advocate for a 25-basis point rate hike, signaling a belief that such a move might still be warranted.
