Eurozone PMI Confirms Economic Slowdown

The European Central Bank fell under more pressure to ease further at Thursday’s meeting after PMI figures across the bloc disappointed.

The euro dipped below $1.36 following the data’s release on Monday and traded at $1.3603 at 7:00 GMT on Tuesday morning.

Financial Times reported that eurozone PMI slipped in May, adding to worries that the bloc’s recovery was slowing down. The region’s Purchasing Managers’ Index fell to a six month low of just 52.2, down from 53.4 in April.

The figure reflected struggles across the entire region, with only Spain and the Netherlands showing any sort of increased momentum.  Germany, the bloc’s largest economy, posted a further dip in factory activity while France’s PMI score came in below 50, indicating a contraction.

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In a separate report, Germany’s consumer price index was also a cause for concern as the nation’s annual inflation figure fell below one percent and its monthly figures were negative. The data falls in line with consumer price data across the region, something the ECB will have to discuss at Thursday’s meeting.

The bank is bound to make a policy change at its June meeting as ECB members have been openly discussing the likelihood in the weeks leading up.  Most expect that the bank will cut its main interest rate, and possibly its deposit rate as well. Some are speculating about further monetary stimulus measures, though many believe the bank will hold off on that front.

In any case, the bank will likely try to devalue the common currency along with raising inflation; but many analysts see a rate cut having a minimal effect on the euro as ECB easing has already been priced in.