Euro takes hit after euro zone figures disappoint

The euro fell after euro zone economic data showed the recovery in the bloc’s biggest economies lost momentum this month.

The single currency fell 0.5 per cent against the dollar to $1.1805 after survey data showed the rebound in France and Germany losing momentum, raising questions about its strength in the third quarter.

The fall puts only a small dent in a sharp rally for the currency in recent weeks, which came after EU leaders agreed a bloc-wide rescue package and the dollar came under broad selling pressure.

There is “a clear sense of concern over the near-term outlook for the economy”, Derek Halpenny from MUFG said before the figures were released and after the European Central Bank said on Thursday there was “no room for complacency”.

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Tone

European stocks were mixed as the figures set the tone for the view on the continent’s economic recovery. Europe’s Stoxx 600 fell 0.3 per cent while London’s FTSE 100 rose 0.2 per cent.

Mr Halpenny mooted the possibility of the ECB looking at adopting additional steps to shore up a deterioration in the economy should the Covid-19 crisis worsen in Europe.

“This doesn’t appear to us to be macro backdrop for the euro to advance against the dollar and, as we have been stating recently, the risks are skewed to the downside for now,” he said.

The eurozone is likely to suffer a sharp increase in unemployment this autumn, the ECB said on Thursday. Top policymakers voiced fears that the labour market was lagging behind the rest of the economy at their monetary policy meeting last month, according to minutes published on Thursday.

In the UK, retail sales volumes rose 3.6 per cent in July from a month earlier while consumer confidence remained subdued in August. A survey on Britain’s economy contrasted the eurozone, with activity picking up more sharply in August than it did the previous month.

Consumption

“The slight uptick in retail consumption may help ease concerns over the fragility of the UK economy - but not for long,” said Alistair McQueen, head of savings and retirement at insurer Aviva. “A rapid recovery still seems a long way off.”

The pound was stable against the dollar at $1.3214 but against the euro it was up 0.3 per cent. €1 in early trading on Friday bought 89.46p.

Shares in the Asia-Pacific region rebounded after a rally in technology stocks had buoyed Wall Street even as signs appeared of worsening US unemployment and manufacturing activity.

Hong Kong's Hang Seng rose 1.3 per cent while China's CSI 300 index of Shanghai- and Shenzhen-listed stocks rose 0.9 per cent. Japan's benchmark Topix index was 0.3 per cent higher.

Futures markets showed US stocks on track for a slight rise at the open on Wall Street, with the S&P 500 tipped to gain 0.2 per cent. – Copyright The Financial Times Limited 2020