The ECB left rates unchanged at its July meeting (see our take here). While presenting a favorable picture in terms of inflation and activity data, the ECB reiterated that the outlook is clouded by exceptional uncertainty – warranting a data-dependent, wait-and-see approach. Market odds for a September rate cut dropped to 20% (from 45%).
On the data front, the euro area’s composite PMI rose to 51.0 points in July, driven by an improvement in the services sector (51.2) and relative stability in manufacturing (49.8). In the U.S., the composite PMI jumped to 54.6 points on the back of services (55.2), while manufacturing’s decline to 49.5 points was attributed to tariffs, higher prices and uncertainty.
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