German Manufacturing Drives Modest Growth in August, PMI Shows

Economic

Summary:

Germany's private sector showed slight growth in August, with manufacturing driving the uptick, while the services sector saw stagnation. Employment continued to decline despite manufacturing growth....

Manufacturing Leads Growth Amid Strong Orders

Germany’s economy saw a modest uptick in growth in August, driven primarily by the manufacturing sector, according to the HCOB Flash Germany Composite Purchasing Managers Index (PMI). The PMI rose to 50.9 in August from 50.6 in July, marking a five-month high and surpassing analysts' expectations. A reading above 50 signals growth, indicating that the economy is expanding, albeit at a modest pace.

The manufacturing sector led the way, with its output index climbing to 52.6, up from 50.6 in July, reaching the highest level in 41 months. This growth was bolstered by a solid increase in new orders, which grew at the fastest rate since March 2022, although export sales saw a slight decline. The expansion in manufacturing suggests resilience in the face of challenges such as global trade tensions and geopolitical uncertainty.

Services Sector Shows Signs of Stagnation

In contrast, the services sector showed weaker performance, with its business activity index falling to 50.1 from 50.6, signaling near-stagnant growth. The services sector's slowdown is a concern, as it typically represents a significant portion of Germany's economic activity.

Employment trends remained a challenge, with job cuts in the manufacturing sector outweighing the slight increase in hiring within services. Employment has been on a downward trajectory since June last year, adding to the challenges facing the German labor market.

The rise in input costs and output prices in August marked a reversal from the previous month’s declines. The increase in input prices was notably driven by the services sector, likely due to rising wages, indicating upward pressure on costs in the economy.

Resilience Amid Economic Headwinds

Despite these mixed signals, the overall growth in August indicates that Germany’s economy is showing resilience, especially in manufacturing. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted that Germany has managed to grow throughout the summer, with a slight pickup in the pace of expansion, considering the ongoing challenges like U.S. tariffs, geopolitical uncertainty, and relatively high long-term interest rates.

While Germany's economic growth remains modest, the strength of its manufacturing sector provides some optimism. However, stagnation in services and ongoing employment challenges underscore the complexities facing the economy. Continued growth in manufacturing and a potential rebound in services will be key to sustaining positive momentum in the coming months.

Source: Reuters

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Gerik

Economic

Stocks

Market Movement and Anticipation of Fed’s Jackson Hole Speech

European equities were little changed on Thursday, with the pan-European STOXX 600 index holding steady as investors awaited updates from the Federal Reserve's Jackson Hole symposium. The market focus remained on Fed Chair Jerome Powell’s speech, which is expected to provide important clues about the Fed's approach to monetary policy, particularly regarding the possibility of rate cuts later this year.

Alongside the Jackson Hole meeting, traders are closely watching for flash purchasing managers’ index (PMI) data for August, which will provide insights into the economic health of the euro zone, France, Germany, and the UK. These reports are expected to play a role in shaping market expectations about economic growth and central bank policy.

Geopolitical Developments and Defense Stocks Surge

Geopolitical tensions remained in focus as discussions continued regarding the security situation in Ukraine. There were concerns in Germany over sending peacekeeping forces, despite Chancellor Angela Merkel’s openness to the idea. In the wake of these concerns, defense stocks saw a 1% rise, after facing pressure earlier in the week due to expectations of a peace deal between Ukraine and Russia.

Aker BP saw a significant gain, rising by 3.1% following news of a major oil discovery in the Yggdrasil field area of the North Sea, boosting investor confidence in the company. In contrast, Novonesis saw a sharp drop of 7.1%, reflecting investor concerns specific to the company’s performance.

As European markets remain subdued, all eyes are on Jerome Powell’s speech at Jackson Hole for potential signals regarding the Fed’s next moves on interest rates. Alongside this, economic data and geopolitical risks continue to shape market sentiment, with defense stocks seeing some positive momentum amid broader uncertainties.

Source: Reuters

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Winkelmann

Forex

Technical Analysis

Economic

The Euro Dollar EUR/USD currency pair continues to move within the framework of the development of growth and a bullish channel. The moving averages indicate the presence of a short-term upward trend for the pair. Prices have broken through the area between the signal lines upwards, which indicates pressure from buyers of the European currency and a potential continuation of the fall in quotes of the currency pair from the current levels. At the time of publication of the forecast, the Euro to Dollar exchange rate for today is 1.1681. As part of the Forex forecast for August 21, 2025, we should expect an attempt to develop a bullish correction of quotes and a test of the resistance level, which is located on the EUR/USD pair near the area of 1.1695. Next, a downward rebound in prices and a continuation of the fall of the Euro Dollar currency pair. The potential target of such a movement on FOREX is the area below the level of 1.1495.

EUR/USD Forecast Euro Dollar for August 21, 2025

An additional signal in favor of the development of the scenario of a fall in the EUR/USD currency pair tomorrow will be a rebound from the resistance line on the RSI indicator. The second signal in favor of this option will be a rebound from the upper border of the descending channel. The cancellation of the scenario of a fall in the quotes of the Euro Dollar currency pair tomorrow will be a strong growth and a breakout of the level of 1.1785. This will indicate a breakout of the resistance area and the continuation of the development of price growth to the level of 1.2025. Confirmation of the fall in the EUR/USD currency pair should be expected with a breakout of the support area at the level of 1.1545, which will indicate a breakout of the lower border of the bullish channel.

EUR/USD Forecast Euro Dollar For August 21, 2025_1

EURUSD Forecast Euro Dollar for August 21, 2025 suggests an attempt to develop a bullish correction of currency quotes with a test of the resistance level near the level of 1.1695. Where should we expect a downward rebound in quotes of the Euro Dollar currency pair and an attempt to continue the fall in the value of the asset on the market to the level of 1.1495. An additional signal in favor of a decrease in the instrument on the Forex market will be a rebound from the resistance line on the relative strength indicator (RSI). The cancellation of the option of a fall in the EUR/USD pair will be a strong increase in quotes and a breakout of the level of 1.1785. This will indicate a breakout of the resistance zone and continued growth of the currency pair on Forex to 1.2025.

Source: forex24.pro

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Gerik

Economic

Forex

Bearish Sentiment on Chinese Yuan Hits Highest Level Since May

Bearish positions on the Chinese yuan have surged to the highest level since mid-May, with analysts turning more cautious about the currency due to growing concerns over China’s economic slowdown and the looming threat of higher U.S. tariffs. According to a Reuters poll, the 12-month earnings estimates for large and mid-cap Chinese firms were downgraded by 1.2% in the last two weeks, reflecting broader market concerns about China’s economic performance.

China’s economy showed signs of weakness in July, with retail sales rising only 3.7% year-on-year, well below the expected 5.9% growth. Industrial output grew by just 5.7%, its slowest pace since November 2024, and the real estate sector continued to struggle with new home prices falling by 2.8% year-on-year. These figures point to ongoing structural challenges in the economy, leading to a reassessment of the yuan’s outlook.

Impact of U.S. Tariffs and Trade Disputes

The threat of escalating U.S. tariffs adds another layer of pressure on China’s growth prospects. While Chinese firms within the Nifty 50 index generate only 9% of their revenue from the U.S., the potential for tariffs of up to 50% on Chinese exports to the U.S. has raised concerns about the long-term impact on China’s economic performance. Analysts warn that a sustained tariff hike could reduce China’s GDP growth by 1 percentage point over time, with industries like textiles particularly vulnerable.

In an attempt to bolster domestic consumption, Indian Prime Minister Narendra Modi announced a series of tax reforms. However, analysts remain cautious about their ability to offset the negative impact of external factors such as U.S. trade policies. Despite these reforms, China’s export competitiveness remains at risk, especially as tariffs continue to weigh on trade relationships.

Mixed Outlook on Other Emerging Market Currencies

The bearish sentiment surrounding the yuan has also impacted other emerging market currencies. South Korea’s won remains bearish, while positions on the Singapore dollar have slightly decreased. In contrast, the Indonesian rupiah has turned negative after previously being bullish, and positions on the Taiwan dollar have been slightly trimmed. Analysts also trimmed bullish positions on the Indian rupee and Malaysian ringgit, highlighting broader regional economic concerns.

Market sentiment towards the U.S. dollar is mixed, as traders await key signals from the Federal Reserve regarding interest rates and inflation. With the Fed’s decision-making uncertain in the face of both inflationary pressures and employment concerns, the dollar’s future trajectory remains unpredictable. However, the strength of the U.S. dollar may exert further pressure on emerging market currencies, including the yuan.

The combination of weak economic data, the threat of higher tariffs, and ongoing political uncertainty has created a challenging environment for the Chinese yuan. While domestic tax reforms may provide some support, the outlook for the currency remains bearish as external risks persist. Investors and analysts are closely watching developments surrounding U.S. trade policies and the broader global economic situation for further clues on the yuan’s performance.

Source: Reuters

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Glendon

Economic

Forex

Euro zone businesses saw new orders increase for the first time since May 2024 in August, helping overall activity expand at the fastest pace in 15 months despite persistent weakness in exports, a survey said on Thursday.

The HCOB Flash Eurozone Composite Purchasing Managers' Index, compiled by S&P Global, rose to 51.1 in August from 50.9 in July, marking the third consecutive monthly improvement and the highest reading since May 2024. A Reuters poll had predicted a dip to 50.7.

PMI readings above 50.0 indicate growth in activity while those below point to a contraction.

"Things are getting better. Economic activity has picked up in both manufacturing and services. Overall, we've seen a slight acceleration in growth over the past three months," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The manufacturing sector showed notable improvement with its headline PMI rising to 50.5 from 49.8 in July, moving into expansion territory for the first time in more than three years. Manufacturing output grew at the quickest rate in nearly three-and-a-half years, with the subindex climbing to 52.3 from 50.6.

Services activity continued to expand but at a reduced pace, with the bloc's dominant sector's PMI slipping to 50.7 from 51.0 in July.

Germany, Europe's largest economy, registered its fastest growth since March, driven by a solid manufacturing expansion despite muted services performance. France's downturn eased to a marginal decline, the smallest in a year, while growth in the rest of the euro zone continued but softened slightly.

Firms continued hiring for the sixth consecutive month, with the pace of job creation quickening to the fastest since June 2024. The employment gains were concentrated in services, while manufacturers continued to shed jobs.

Inflation pressures intensified in August, with input costs rising at the sharpest rate in five months. Service sector cost inflation accelerated to the highest since March, while output prices across the bloc increased at the fastest pace in four months.

"The European Central Bank might wince a little at the rising cost pressures in the services sector. After all, it’s banking on slower wage growth to help bring inflation down in this crucial part of the economy," de la Rubia added.

"That said, there’s a bit of relief in the fact that inflation in service-sector selling prices has remained more or less steady."

ECB policymakers are seen waiting until December if they opt to cut rates one more time, a Reuters poll found, but there is no longer a majority consensus for where the deposit rate will be by end-year.

Source: Reuters

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Gerik

Economic

Commodity

Trump’s Call for Fed Governor Resignation Fuels Gold Demand

Gold prices remained above $3,342 per ounce, continuing to benefit from heightened political uncertainty after President Donald Trump publicly called for Federal Reserve Governor Lisa Cook’s resignation. Trump’s demand, which was fueled by allegations of mortgage fraud against Cook, raised concerns over the Fed’s independence. As a result, gold saw a nearly 1% increase, bolstering demand for the metal as a safe-haven asset amid fears of increased political interference with the central bank.

Traders are also eyeing Chair Jerome Powell’s keynote speech at the Jackson Hole symposium on Friday for clues about the Fed’s future policy moves. Many expect the central bank to announce a rate cut of at least 25 basis points in its upcoming meeting. Such a move would benefit gold, which does not offer interest payments, as lower rates generally lead to weaker yields on bonds, making gold more attractive. Minutes from the Fed’s July meeting suggested that officials were more concerned about inflation risks than the labor market, which further fueled expectations of a dovish stance from the central bank.

Gold’s Year-to-Date Performance and Outlook

Gold has seen a strong rally this year, with prices rising by more than a quarter, particularly during the first four months, when prices hit a record high. Central-bank buying and inflows into exchange-traded funds (ETFs) have supported the precious metal’s performance. Analysts, including those at UBS, suggest that there is still room for further gains, with prices expected to remain elevated in the coming weeks. Fitch Solutions forecasts that gold will trade between $3,200 and $3,600 per ounce for the remainder of 2025.

At 9:00 a.m. in Singapore, gold was little changed at $3,342.40 an ounce, with the Bloomberg Dollar Spot Index remaining steady. Other precious metals, including silver, palladium, and platinum, were flat, reflecting a stable market as investors await further signals from the Fed and political developments surrounding the central bank.

As gold maintains its gains, the ongoing political pressures on the Federal Reserve and expectations for a rate cut are key factors influencing the market. Gold’s position as a safe-haven asset makes it particularly attractive during times of uncertainty, with traders closely monitoring Powell’s speech and future economic indicators for further guidance.

Source: Bloomberg

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Gerik

Economic

Renewable Energy Boosts Emission Reductions

China’s carbon dioxide emissions fell by 1% year-on-year in the first half of 2025, according to a report from the Centre for Research on Energy and Clean Air (CREA). This decline was primarily driven by a surge in renewable energy capacity, including record additions of wind turbines and solar panels, which outpaced the growth in electricity demand. As a result, thermal power plants burned less coal, contributing to a 3% reduction in emissions from the power sector. The renewable energy boost was particularly notable in the first five months of the year, before a rule change in June was expected to reduce profits for wind and solar farms.

The decline in emissions was further supported by a slump in the property sector, which reduced output and emissions from the cement and steel sectors. However, the reduction in steel sector emissions could have been greater, as mills often shut down more efficient electric arc furnaces in favor of cheaper coal-based production methods. Despite these challenges, the overall decline in emissions from these sectors remains significant.

Chemical Sector Emerges as a New Emission Hotspot

However, the progress made in other sectors was partially offset by a surge in emissions from the chemicals sector. Chemical plants that convert coal into synthetic fuels and feedstocks for plastics saw a 20% increase in coal use during the first six months of the year, building on a 10% increase in 2024. Coal-based chemical processes are more polluting than petroleum-based alternatives, and the chemicals sector emitted a staggering 690 million tons of CO2 in 2024, approximately 410 million to 440 million tons more than would have been released by traditional chemical plants. This sharp increase in emissions from the chemicals sector threatens to undo some of the gains made in reducing emissions from power generation and heavy industries.

The report also noted ongoing geopolitical developments, including a recovery in China’s rare-earth magnet exports to the U.S., rising 76% month-on-month in July. This rebound comes after Beijing agreed to normalize exports as part of a trade truce with Washington. Meanwhile, tensions with India are also being addressed, as both countries explore ways to resolve their long-standing border disputes.

While China has made progress in reducing emissions through increased renewable energy capacity, the rising coal dependence in the chemicals sector poses a significant challenge. Continued growth in this sector, if not addressed, could undermine China’s emissions reduction efforts. The country will need to focus on cleaner alternatives in the chemical industry to meet its environmental goals and maintain its momentum in the global transition to a greener economy.