According to the Flash Poll,
- New business in the German services sector barely increased in August.
- Companies also reported a sharp drop in new export orders.
- Work backlogs have shrunk, forcing companies to cut staff amid weak demand.
- Producer price inflation accelerated, while input prices increased at the slowest pace since March 2021.
ECB C rateut Expectations
The Flash survey’s subcomponents on input prices and the labour market could fuel speculation about an ECB rate cut in September.
Weaker labor market conditions and lower input prices could signal a weaker inflation outlook. Input prices reflect wages. Lower wages could reduce disposable income and consumer spending, which could dampen demand-pull inflation.
Investors should nevertheless take into account the eurozone PMI data, which could have a bigger impact on the path of ECB rates. Economists expect the eurozone services PMI to remain at 51.9 in August.
An unexpected decline in the services PMI, a downward trend in input prices and easing labor market conditions could strengthen bets on a rate cut in September.
EUR/USD Reaction to Private Sector PMI Indices
Ahead of the private sector PMI release, EUR/USD fell to a low of $1.11401 before rising to a high of $1.11648.
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