Euro, sterling drop on weak PMIs, dollar hits 2-month high
By Samuel Indyk and Ankur Banerjee
LONDON (Reuters) — Gloomy business activity data from the euro area and Britain sent the euro and pound tumbling against the dollar on Wednesday, pushing the greenback to its highest level in two months.
HCOB's flash Composite Purchasing Managers' Index (PMI) for the euro area, compiled by S&P Global (NYSE:SPGI), dropped to 47.0 in August from July's 48.6, its lowest since November 2020. The services component sank to 48.3 from 50.9, its first time below the 50 mark that separates growth from contraction this year.
The German composite figure fell to its lowest since May 2020 as a deepening downturn in manufacturing output was accompanied by a renewed contraction in services activity.
The single currency weakened after the German data, hitting its lowest level against the dollar since June 15 at $1.0805.
«The decline in services activity was a sharp move and we've seen a soft euro environment,» said Niels Christensen, chief analyst at Nordea.
«If inflation data continues to slow then the European Central Bank might pause their tightening cycle in September.»
It was a similar picture for the pound, which fell to its lowest level in over a week at $1.2623, after the S&P Global/CIPS PMI tumbled to 47.9 in August, the lowest level since January 2021, while the survey also showed price and cost pressures eased.
«This combination… should give the Bank of England food for thought in advance of its next interest rate decision in September and suggests an increase is no longer a certainty.» said Martin Beck, chief economic advisor to the EY ITEM Club.
The dollar rose to a two-month peak after the data, with investors looking to Federal Reserve chair Jerome Powell's speech this week at the
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