span>span>Wednesday 20th July /span>span>2022/span>span> - 15:25 (BST)/span>/span>
Initial estimates released by the European Commission have shown consumer confidence across the EU continued to tumble during July. The latest indicator fell to -27 from -23.6 in June, significantly lower than the -24.9 expecting and also marked the fourth-straight monthly decline. It also moved the EU back towards the historic lows seen at the start of the pandemic in April 2020.
Rising inflation and the ongoing conflict in Ukraine weighed heavy on households’ ability to spend and is likely to be reflected in retail numbers later this month. The European Central Bank (ECB) is also widely expected to raise its base rates by 25 bps tomorrow which would put further pressure on individual lending and credit appetite.
Conversely, industry and service sector sentiment continued to improve, with manufacturers bullish about future production and order books but less so on employment. The service sector was more upbeat about business over the past three months, but less optimistic looking forward.
Attentions now turn to tomorrow’s announcement from the ECB with EUR/USD languishing near parity. Since becoming freely available in 1999, the single currency has spent very little time below this key level of resistance. The last time it did so was between 1999 and 2002, when it sank to a record low of $0.82 in October 2000.
The euro’s slide is a headache for the ECB as allowing the currency to fall only fuels the record-high inflation it is battling to contain. But trying to shore it up with higher interest rates could exacerbate recession risks.
