The markets are expecting ECB president Mario Draghi to announce his bold strategy to tackle the ongoing Eurozone debt crisis, but disagreements amongst policymakers as to how successful the measures will be has caused doubt to creep into the markets.
A succession of poor economic data out of the Eurozone has caused some investors to take a cautious approach. The latest bad data released came from the Markit compiled Purchasing Managers Index for August which showed that the majority of Euro nations have contracted for seven months in a row. The index fell to 46.3, down from the forecasted estimate of 46.6 and down from Julys figure of 46.5.
“The final August PMI came in only slightly below its earlier flash estimate, leaving the euro zone economy on course to fall back into technical recession in the third quarter,” said Rob Dobson, senior economist at data compiler Markit.
Trader nerves haven’t been helped by the latest retail sales figures compiled by Euro stat. Retail sales across the Euro zone fell by 0.2% in July as consumers continued to tighten their belts and attempt to save cash. Year-on-year sales have dropped by 1%. Looking at individual countries, the largest decreases were recorded in Portugal (-7.6%) and Spain (-7.3%)
More gloom emerged from France this morning as the country’s service sector PMI came in at just 49.2 in August, rather worse than the ‘flash’ estimate of 50.2.Economists weren’t expecting the French service sector to shrink. Firms reported that they cut jobs at the fastest rate since March 2010 – another sign that France’s economy is in trouble.
Germany added to the disappointing data with its services sector contracting by its fastest rate in three years, with a PMI of 48.3. Spain’s service sector contracted for the 14th month in a row, while Italy posted its 15th straight month of falling activity. Both countries recorded a PMI of 44.0.
The Pound to Euro exchange rate is currently trading at 1.266
The Pound to US Dollar exchange rate is currently trading at 1.589
The Pound to Australian Dollar exchange rate is currently trading at 1.560
The Euro to US Dollar exchange rate is currently trading at 1.254
The Euro to Pound exchange rate is currently trading at 0.789
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