Euro Loses Ground on Slew of Lackluster Business Activity Data

The euro lost ground against the US dollar on Monday, declining from the highest level since January 2015 in the wake of fresh reports on business activity within the euro zone. The shared currency also dropped against the British pound after being weighed by similar releases in France and Germany, the two biggest economies in the European Union.

IHS Markit, which releases monthly flash readings for business activity in the euro zone, stated earlier today that the manufacturing purchasing managers’ index fell to 56.8 in July. The reading was the lowest in 3 months following a reading of 57.4 in June, while analysts had forecasted a smaller drop to 57.2. The region’s services purchasing managers’ index remained unchanged from the previous month at 55.4.
Smaller business activity in July appears to result from slower momentum in the wake of a recent growth spurt in the euro zone. However, readings well above 50 add to evidence that economic growth remained stable.
When coupled with easing inflation pressures, today’s data may support the European Central Bank’s case for maintaining monetary policy. Some officials from the central bank hinted in recent speeches to possible tapering of the bank’s massive quantitative easing program. However, the current policy course could be voted to remain unchanged if the growth loses more momentum. The European Central Bank’s next policy meeting is on September 7.
Two other releases from IHS Markit weighed on the shared currency today. The releases showed that the services purchasing managers’ indexes of France and Germany declined from 56.9 and 54.0 to 55.9 and 53.5, respectively. Germany’s manufacturing purchasing managers’ index also dropped from 59.6 to 58.3, while the same index for France rose from 54.8 to 55.4 to mark today’s only positive reading.
EUR/USD dropped to 1.1634 as of 14:30 GMT on Monday from 1.1662 when trading began this week. EUR/USD touched 1.1633 at 13:35 GMT, the pair’s lowest level since Friday. EUR/GBP was at 0.8932 after reaching as low as 0.8926 at 13:00 GMT, a level last seen on July 20. EUR/GBP started the week at 0.8975.

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