Latest news with #euro area
Yahoo
6 days ago
- Business
- Yahoo
Sterling poised to end 3-day rally vs dollar on economic, tax concerns
By Stefano Rebaudo (Reuters) -Sterling was set to snap a three-day winning streak against the dollar on Thursday, pressured by concerns over the UK economy and potential tax hikes. Progress in U.S. trade talks with key partners eased investor worries about a global trade war, sparking a rally in risk assets and lifting the pound earlier this week. However, UK PMI data showed that business activity grew only weakly in July and employers cut jobs at the fastest pace in five months, according to a survey. Such figures are likely to add to speculation about a Bank of England interest rate cut next month. Markets are currently pricing an 80% chance of a rate cut in August and two easing moves by year-end. The pound dropped 0.28% to $1.3544, after hitting a fresh two-week high early in the session at $1.3588. The dollar edged up versus the euro and the yen after progress in trade negotiations. Sterling weakened against the single currency, which was down 0.16% at 86.81 pence.. The euro hit 86.98 pence last week, its highest level since April 11. The rate differential between the UK and the euro area has been affecting the cross. Markets are pricing in a European Central Bank terminal rate of 1.75%, down from the current 2%, while expecting the Bank of England to cut rates by 85 basis points by the end of next year. 'Fears over strained public finances, the growing likelihood of more tax bumps and its implications for the UK economy are weighing on the pound against the euro,' said Matthew Ryan, head of market strategy at global financial services firm Ebury, after mentioning June data on government borrowing released on Tuesday. Britain's government borrowed £20.68 billion ($27.86 billion) in June. A Reuters poll forecast had pegged public sector net borrowing at a median of £16.5 billion.
Bloomberg
6 days ago
- Business
- Bloomberg
Euro-Zone Private Sector Grows at Fastest Pace in Almost a Year
The euro area's private sector grew at the quickest pace since last August as a three-year manufacturing downturn nears an end and the services sector gathers momentum, even as a trade showdown with the US looms. The Composite Purchasing Managers' Index compiled by S&P Global rose to 51 in July from 50.6 in June, further above the 50 threshold separating expansion from contraction. Analysts had predicted a reading of 50.7.
Irish Times
11-07-2025
- Business
- Irish Times
Growth in euro zone likely to stay moderate out to 2027
Growth in the euro area is likely to stay moderate out to 2027 as trade tensions and elevated uncertainty are expected to weigh on activity, despite some boost from higher defence and infrastructure spending, the International Monetary Fund (IMF) has said. The group said the geopolitical situation in Europe is expected to 'dampen sentiment' and 'weigh on investment and consumption', despite looser monetary policy and projected gains in real income. Headline inflation is projected to remain broadly at target from the second half of 2025, while core inflation will return to 2 per cent in 2026. Risks to growth are on the downside while they are two-sided for inflation. Trade policy uncertainty, potential tariff escalations, and ongoing geopolitical tensions 'may negatively impact' demand and growth more than previously anticipated. READ MORE These factors are expected to outweigh any positive effects of unanticipated fiscal easing, particularly if countries increase defence spending, the IMF said. Regarding inflation, lower-than-expected non-energy goods prices because of trade diversion, weaker-than-expected activity and wages, as well as the recent euro appreciation could result in inflation below the baseline. On the other hand, fiscal spending could turn out larger or more inflationary than in the baseline, while geopolitical tensions, supply chain disruptions, and tariff escalation could lead to higher import prices, and wage growth may not moderate as strongly as expected. In an increasingly challenging global environment, a 'comprehensive policy strategy' is needed for 'decisive EU-level actions' to boost Europe's growth potential and financial resilience, it continued. This includes reforms to strengthen the EU single market, enhance energy security, and orient the EU budget to invest in common public goods. Ensuring debt sustainability and securing financial and price stability were 'essential prerequisites' for the successful implementation of these reforms. The IMF said the banking system was adequately capitalised and liquid overall, while some banks would 'dip into their buffers' under stress. It identified financial stability risks stemming from interlinkages with non-bank financial institutions and called on the authorities to enhance data sharing, strengthen systemic risk monitoring, and conduct system-wide stress tests. While welcoming progress on several fronts, including the strengthening of banking supervision and introduction of the new Anti-Money Laundering Authority, fragmentation 'continues to hinder' the development of more resilient, deeper, and integrated euro area-wide financial markets. The IMF said that establishing arrangements for the Single Resolution Fund to offer guarantees – ideally supported by an EU fiscal backstop – was critical for enhancing the provision of central bank liquidity during bank resolutions and will boost the resilience of the euro area-wide financial system. It also said the activation of the national escape clause of the EU fiscal rules should be limited to the initial phase of scaling up defence spending and not to finance recurring spending over an extended period. Its directors concurred that non-defence net current expenditures should remain consistent with adopted medium-term fiscal plans and emphasised that it will be important to assess the impact of overall defence spending on debt sustainability on an ongoing basis.
