The single currency endured a volatile session yesterday, initially rallying before slipping to find support around 1.0840 as markets await PMI data this morning. EURUSD yesterday hit its lowest level in two months but remains within a tight trading range with markets continuing to be influenced by US yields and China headlines as we await an update from Fed Chair Jerome Powell at the Jackson Hole symposium.
This morning’s euro area composite PMI survey will hopefully provide further clues into the impact of ECB rate increases on the economy. Recent weak manufacturing data and German ZEW survey along with the slowdown felt in China suggest some further softening may be on the cards for the PMI. The ECB remains committed to fighting above target inflation, so a slowdown in growth is unlikely to stop officials from delivering a final 0.25% rate increase at the next policy meeting in September.
UK PMI data is also due out this morning and comes after the last survey plunged in July and is expected to remain at subdued levels this month, suggesting that momentum in the economy continues to suffer as interest rate increases continue to bite. A composite reading of 50.5 for August is the consensus, down from the previous print of 50.8, but still above the 50 mark that separates contraction from expansion. Today’s data is unlikely to have a major influence on the pound which continues to tread water against the greenback trading on a 1.27 handle after failing to breach 1.28 yesterday.