The euro remains in tight ranges and on the backfoot following the more dovish European Central Bank communique a few weeks ago, whilst more recently suffering from an increasingly cautious macro backdrop as global markets factor in yet more bad news from China.
Some months ago, we raised a red flag over the stalling Chinese economy. Acute strain in the property sector there is once again raising its head (Evergrande in particular) and this is reflected in equity market weakness, euro weakness and some dollar strength. It remains a long-term factor for the euro direction. On the immediate horizon sees Flash PMI data out of France and Germany, which will give a fresh reading on the services and manufacturing sector, which have both been contracting. Data such as this will help shape the ECB’s view towards further rate policy, which has become far more cautious of late. Look for Christine Lagarde’s speech at the symposium in Jackson Hole Friday for hints toward policy objectives.
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