Euro Stumbles As Business Growth, Retail Sales Stall

The euro weakened to a five-week low against the US dollar at the end of the trading week on the latest eurozone economic data that is indicating lackluster growth. Despite a rallying DAX and FTSE, the currency could not record any gains, adding to its string of losses over the last month.

According to Eurostat, the official European statistics office, retail sales in the eurozone rose 0.3% in June for a 1.2% annual boost. This is lower than the 0.4% and 1.4% the market had initially anticipated. Consumers increased their purchases of food, beverages, tobacco, and online goods, but they bought fewer clothing and footwear items. Also, retail sales saw their biggest gains in Germany and Spain and their sharpest decreases in Estonia, Finland, and Portugal.

The eurozone experienced sluggish business growth to kick off the third quarter. IHS Markit’s Eurozone Composite Final Purchasing Managers’ Index (PMI) tumbled to 54.3 in July, down from 54.9 in June – anything above 50 shows growth.

A sub-index that measures new orders also slipped to its second lowest level over the last 12 months of 54.1. Businesses are not optimistic for the future as the future output index slumped to 63.1, a 20-month low.

There was another warning sign: the headcount increased at a weaker pace in June.

Rob Dobson, a director at IHS Markit, told Reuters:

The final PMI numbers confirm the euro area economy started quarter three on a softer footing.

The outlook seems to be turning into a straight choice between the upturn being sustained at its current subdued pace or rising headwinds reining in growth further during the months ahead. On this front, downside risks are more prevalent.

Last week, the European Central Bank (ECB) left its monetary policy as is, but policymakers are projecting that it will begin to tighten policy and raise interest rates next year. The Bank of England (BOE) announced a rate hike on Wednesday, bringing rates to 0.75%, their highest levels since the 2009 recession.

The EUR/USD currency pair slid 0.03% to 1.1583, from an opening of 1.587, at 14:03 GMT on Friday. The EUR/GBP currency pair rose 0.04% to 0.8906, from an opening of 0.8908.

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