Euro slips after weak data signals slowing economic activity

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The euro declined on Monday after data pointed to a slowing eurozone economy, ahead of major central bank policy decisions later in the week.

The single market currency fell 0.4 percent to $1.109 against the dollar after the region’s Flash Composite Purchasing Managers’ Index, a measure of manufacturing and services activity in the sector, fell to an eight-month low of 48.9 in July from 49.9 in June.

This reading is the second month in a row that the index is coming in below the 50 mark, which indicates that most businesses have reported a contraction in activity, as higher borrowing costs have taken a toll on the economy.

A 0.25 percentage point hike in the European Central Bank’s benchmark rate to 3.75 percent is almost certain when policymakers meet on Thursday, with another hike likely in the coming months.

Europe’s region-wide Stoxx 600 added 0.1 percent, paring morning losses, as did Germany’s DAX and London’s FTSE 100. France’s CAC 40 declined 0.2 percent, led by a fall in consumer goods stocks.

Spain’s Ibex 35 index fell 0.6 percent after the country delivered inconclusive election results over the weekend, in which both the right and the left failed to secure a clear path to form a government.

Across the Atlantic, the US Federal Reserve is expected to hike its key interest rate by 0.25 percentage points on Wednesday, from its current target range of 5 per cent to 5.25 per cent.

Investors and economists are still divided over whether the hike will mark the end of the US central bank’s 16-month-long monetary policy tightening campaign, as inflation data at the start of the month showed consumer prices rose at the slowest pace since 2021.

Contracts tracking Wall Street’s benchmark S&P 500 rose 0.2 percent, while contracts tracking the tech-focused Nasdaq 100 rose 0.3 percent ahead of the New York open.

Wall Street stocks sold off late last week as disappointing earnings reports dragged down the high-flying technology sector.

Due to report earnings Tuesday, as Meta reports on Wednesday, investors will pay careful attention to industry giants Microsoft and Alphabet.

In Asia, China’s benchmark CSI 300 index fell 0.4 per cent, while Hong Kong’s Hang Seng shed 2.1 per cent.

As China’s economy struggles to recover from three years of severe COVID-19 lockdowns, investors will be hoping for more stimulus measures from the country’s officials at a widely anticipated Politburo meeting this week.