The euro is trading mixed against a basket of currencies to start the trading week. With the latest economic data disappointing investors, the central bank, which announced a new edition of quantitative easing (QE) during last week’s policy meeting, is encouraging eurozone countries to start employing fiscal measures to sustain anemic growth. Can countries stimulate their economies out of a slump?
On Monday, the eurozone IHS Markit manufacturing purchasing managersâ index (PMI) for September slipped to 45.6, down from 47 in August. This is the lowest the manufacturing PMI has been in 83 months and is lower than the median estimate of 47.3. Also, the flash eurozone services PMI fell to 52 in September, down from 53.5 in August, which is an eight-month low.
The German manufacturing PMI declined to 41.4 this month, down from 43.5 last month.
Anything under 50 suggests a contraction.
On Friday, consumer confidence in September was -6.5, up from -7.1 in August. The market had penciled in a rate of -7.8.
Next on the data front will be year-on-year loan growth for August, the unemployment rate, and YoY M3 money supply growth.
Because most of the region continues to post lackluster economic data, the European Central Bank (ECB) is urging eurozone nations to jumpstart their economies by using fiscal tools. This could be difficult to achieve, mainly because many of these eurozone countries are still facing enormous budget deficits after trying to stimulate their way out of the financial crisis a decade ago.
Recently, the ECB deepened interest rates into negative territory and ignited another round of aggressive bond-buying. The ECBâs mantra is to do whatever it takes for however long it takes to achieve respectable levels of growth. But analysts are worried that the ECB is firing off the big guns prematurely, warning that when the recession does strike, incoming ECB head Christine Lagarde will only have the option of cutting rates even further.
The EUR/USD currency pair tumbled 0.18% to 1.0998, from an opening of 1.1019, at 19:29 GMT on Monday. The EUR/GBP rose 0.18% to 0.8847, from an opening of 0.8837.
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