By Geoffrey Smith
Investing.com – The dollar changed slightly against European currencies in early trading in Europe on Monday, but fell to its 15-month low after a stronger-than-expected reading from a major Chinese business survey.
Those who trade more freely than the official price on the mainland rose as high as 6.8443 in Asian trade, after the country’s official Purchasing Managers’ Index rose to 54.5 in August from 54.1 in July. In a break with the prevailing pattern since the outbreak of the pandemic, services emerged more vigorously than manufacturing, reinforcing hopes that private consumption is finally recovering.
In contrast, the manufacturing PMI fell slightly to 51.1.
Iris Pang, chief economist for Greater China with ING, said in a research note that the figures showed that China was increasingly dependent on domestic factors for growth, which is made possible by its greater success in keeping coronavirus under control.
Data from regional business surveys in the US, on the other hand, suggested that the recovery reaches a short-term high, with the main indices in the surveys for New York, Chicago and Philadelphia all falling last week. That puts the Institute for Supply Management’s national manufacturing index, due to be published on Tuesday, on track for a modest decline, according to Ian Shepherdson of Pantheon Macroeconomics.
Trade in Europe is expected to be subdued on Monday by the British holiday, but both the euro and sterling remain well bid against the dollar in the wake of Federal Reserve President Jerome Powell’s speech at the Jackson Hole symposium on Thursday, announcing a shift to what looks like a lighter monetary policy in the foreseeable future.
Powell’s speech overshadowed one of the European Central Bank’s chief economists, Philip Lane, who argued that the impact of monetary policy so far during the pandemic was insufficient.
German bank (DE 🙂 strategist Ulrich Stephan noted that the ECB is likely to further increase its bond buying program in the light of the inflation target, adding that this is all the more likely given the risk that the European Parliament may not approve the proposed European Recovery Fund. Sept. 18
The euro was flat at $ 1.1905 at. 3 ET (0700 GMT) while sterling was unchanged at $ 1.3335 after testing a new high for 2020 over the weekend in response to a report that the government is planning a series of tax increases to cover a budget deficit that has exploded due to of covering the cost of Covid-19-powered lockdowns.
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