USD depreciated slightly against most of its major rivals in the European session on Thursday as investors digested the Eurozone’s preliminary purchasing-managers indexes (PMIs) for August, which were a mixed bag, indicating a solid expansion in services activity and contraction in manufacturing, as well as the negotiated wage data for the second quarter of 2024, showing a steep slowdown in the region’s pay growth.
S&P Global reported its flash estimates revealed that its Eurozone composite PMI climbed to 51.2 early this month from 50.2 in July, indicating that business activity in the Eurozone’s private sector grew in August at a faster pace than in the previous two months. The reading exceeded economists’ forecast of 50.1 and marked the sixth straight monthly expansion in activity. The August growth was underpinned by a solid increase in services activity, which was, in part, due to a strong expansion in France, boosted by the Paris Olympics. Meanwhile, the factory activity contracted further, dropping to its 8-month low.
The European Central Bank announced that the negotiated pay in the Eurozone demonstrated a 3.6% YoY increase in the second quarter of 2024, following a 4.7% YoY rise in the first quarter. The reading was generally in line with economists’ forecasts and represented the weakest annual gain in the region’s negotiated wages since the fourth quarter of 2022.
Deceleration in the euro area’s pay growth and worse-than-expected manufacturing PMI reinforced expectations of more rate decreases from the ECB, following the initial cut in June.