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breaking news Eurozone final October manufacturing PMI 46.4 vs. preliminary 46.6


A further collapse in demand conditions accentuates the slowdown in the eurozone manufacturing sector in October, with a 29-month low. Geopolitical uncertainty, high inflation and weaker economic conditions around the world weighed on spending by overseas customers, as manufacturing output fell for a fourth consecutive month. S&P Global notes that:

“The eurozone goods-producing sector entered a deeper decline at the start of the fourth quarter. PMI surveys are now clearly signaling that the manufacturing economy is in recession. In October, new orders fell at a pace we have rarely seen in 25 years of data collection – it was only during the worst months of the pandemic and the height of the global financial crisis between 2008 and 2009 that the declines were steeper.

“Factors that could aggravate the slowdown include inflation

Inflation

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Read this term, which remains stubbornly high despite continued evidence that supply chain pressures are easing. Manufacturing business sentiment remained entrenched in negative territory once again in October, suggesting that companies expect these difficult conditions to extend into 2023.

“Developments in the energy markets will remain at the center of concern for manufacturers in the euro zone throughout the winter. The wave of mild weather across Europe so far bodes well and has helped push down wholesale gas prices. However, we remain mindful of the risk that atypical cold weather could increase the need for energy rationing, leading to widespread disruption of manufacturing output.


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