Talking Points
- August purchasing managers’ indexes from the Euro-Zone suggest the area’s economy remains robust.
- That could lead to further Euro strength once the current consolidation period ends.
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August purchasing managers’ indexes (PMIs) for France, Germany and the Euro-Zone as a whole, released Wednesday, suggest the area’s economy is still growing robustly and could lead to further Euro strength in the days ahead.
While the currency has been strengthening consistently against the Dollar, the Yen and the British Pound, the rally has run out of steam in the last few sessions. However, its prior strength could now resume as the markets wait for guidance from European Central Bank President Mario Draghi on when Euro-Zone monetary policy is likely to be tightened.
In a speech Wednesday in Germany he gave little away and is also unlikely to provide any forward guidance in a speech Friday at the Kansas City Fed’s economic symposium in Jackson Hole, Wyoming. Instead, the issue of tightening monetary policy – or ‘tapering’ – is likely to be discussed at the ECB meetings in September and October – paving the way for a possible tightening in the New Year.
That should support the Euro longer-term even though Euro-Zone inflation is currently well below target and the ECB has said it is worried about the currency ‘overshooting’ to the upside.
In this webinar, I discussed these issue before and after the release of the PMIs.
--- Written by Martin Essex, Analyst and Editor
To contact Martin, email him at martin.essex@ig.com
Follow Martin on Twitter @MartinSEssex
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