Current Pmi RatesActual Pmi rates
The PMI for IHS Markit production in the euro-zone increased to 55.1 in July, up from 54. before and before the consensual prediction of a decrease to 54.7. As a result, the euro-zone association index fell to 54. According to IHS Markit, this means that the euro area economies could "have slowed again" at the beginning of the third trimester.
"Based on its current shape, the headquarters output index is largely consistent assuming quarter-on-quarter GDP expansion of around 0.4% at the beginning of the third quarter. This is slightly lower than our (and the ECB's) forecast of 0.5% in the second and third quarters, but still above the region's projected economic recovery," says Jessica Hinds, a senior finance executive at Capital Economics.
Order intake in the new factories in July dropped to its low for almost two years, indicating that a deceleration in real activities could be foreseen for the coming few months-a fact mirrored in the fact that businesses' projections for 2011 were measured every month. 21 % of new orders were received in July, which is the highest figure in the previous year. In the service industry, current economic expansion has meanwhile decelerated and order intake grew at a slower pace in July.
"Past experience shows that the HOO index is largely consistent assuming about 0.4% annual average GNP expansion at the beginning of the third quarter." Euro zone GNP of 0.4% in the third Q3 would be below the European Central Bank's own prediction of 0.5% and below the capital economy's own prediction.
Following the publication, the euro was 0.07% lower at 1.1685 against the dollar, while the euro sterling exchange rate fell by 0.12% to 0.8914. On Tuesday, the euro was lower against all other mature currency pairs except the Swiss franc. However, given the downward risk to the prospects, the ECB is likely to emphasize later this week that its normalization agenda continues to depend on input and that interest rates are likely to stay on ice at least next summer," Hinds sums up.
Finally, the euro area prospects for euro area inflation, which itself is at the centre of the ECB's interest rates policies, depend to a large extent on the block's expectations for macroeconomic expansion. In June, the ECB declared that it would buy 30 billion of EU sovereign debt every month until the end of September 2018, when it would lower the key interest rates on weekly buys to 15 billion euros before reducing them to zero at the end of December.
Yet the bench had also previously dispelled the hope of dealers that it would be able to lift interest rates from their June 2019 highs, which would have dealt a devastating shock to the euro and a wide range of predictors who had been hoping that the end of the extremely low interest rate age would be near.
"Governing Council of the ECB anticipates that ECB interest rates will stay at current rates at least until 2019 and in any case for as long as necessary to make sure that developments in headline rates are in line with current sustainable growth expectations," the Bank said in its declaration.
Interest rate changes or indications that they are in sight are only made in reaction to inflationary fluctuations, but have an effect on currency exchange rates as they affect global financial inflows and their appeal to short-term gamblers. As everywhere in the industrialised countries, with the exeption of the USA, euro area GDP grew at a significantly slower pace in the first trimester, when GDP grew by only 0.4%, following an upturn of 0.7% in the last three month of 2017.
Meanwhile, recent market undervaluing has been reflected in recent publication of data on price increases. Whilst the overall rate of inflation has returned to the ECB's 2% objective, the more important figure for underlying rate declined from 1% to 0.9% in July.