European session review: EUR gains despite worse-than-expected Eurozone’s August economic sentiment data

EUR appreciated against other major currencies in the European session on Monday, as Friday’s Jackson Hole speech of the Fed’s Chairman Powell indicated that the U.S. central bank is in no rush to hike interest rates, bringing relief to global markets. 

Meanwhile, investors looked past the European Commission’s (EC) survey, which showed that the economic sentiment in the eurozone declined slightly more than anticipated in August. According to the report, the Economic Sentiment Indicator (ESI) for the euro area decreased 1.5 points to 117.5 in August, falling back from an all-time high of 119.0 in July. Economists had forecast the ESI to fall to 117.9 in August. The ESI’s was dampened by declines in confidence in services, industry and among consumers, while construction and retail trade recorded gains.

In the focus of market participants were also the remarks of the ECB’s Governing Council member Francois Villeroy de Galhau, who said on Monday that the economies in France and the Eurozone should be back to pre-COVID levels in early 2022 or maybe earlier. He also noted that financing conditions had improved since June and he saw no risk of a sustainable surge in the Eurozone inflation. Villeroy added that he expected the ECB’s PEPP purchases to be there until at least March 2022. He saw no urgency to decide on asset purchases at the September meeting.

Market participants also looked for the release of the August CPI data for Germany, the EU’s largest economy (due at 12:00 GMT). Economists expect the country’s inflation rose 0.1 percent m-o-m and 3.9 percent y-o-y this month.