The S&P Global Composite Purchasing Managers’ Index (PMI) for August fell to 45 this month., the lowest since February 2021, as demand for services and manufacturing weakened in the face of inflation and tighter financial conditions. It should be noted that a reading below 50 indicates a contraction in activity.
The fall in demand was exactly what the Fed tried to achieve with its toughest streak of interest rate hikes since the 1980s. The Federal Reserve raised rates from near zero in March to their current range of 2.25% to 2.50%, with more hikes expected in the coming months.
“The manufacturing and services PMI came in well below expectations, which is raising concerns about the strength of this economy and supporting the narrative that Fed Chairman Powell may be more inclined to slow the pace. tightening,” said Edward Moya, senior market analyst at Oanda.
Against a basket of six currencies, the dollar index fell 0.523% to 108.42 units, having earlier hit its highest level since mid-July.
The euro rose 0.35% against the greenback and stood at 0.9977 dollarshaving touched a two-decade low of $0.99005 earlier in the session, on renewed concern that the energy crisis will keep inflation high, making a recession in Europe almost certain.
Data showed that business activity in Europe contracted less than expected in August, although the outlook remains bleak.
“Renewed concern about Europe after the gas price hike is the main reason why the euro has fallen,” said Holger Schmieding, chief economist at Berenberg.
Meanwhile, Russia will cut off natural gas supplies to Europe via the Nord Stream 1 pipeline for three days at the end of the month, the latest reminder of the precarious state of the continent’s energy supplies.
Source: Ambito
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