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What’s happening: The euro recorded gains against the US dollar on Tuesday, as investors assessed the latest economic reports.
What happened: Data released on Tuesday showed an acceleration in inflation in the Eurozone, sparking speculations of the ECB delaying cutting interest rates.
Weakness in the US dollar also helped the EUR/USD surpass the major 1.11 resistance level for the first time since late December last year.
Why it matters: The annual inflation rate in the Eurozone accelerated to 2.6% in July, from 2.5% in the previous month. The figure came in higher than initial market estimates of 2.4%. Energy costs rose sharply by 1.2% in July, versus a 0.2% gain in June.
Eurozone’s current account surplus widened to €52.4 billion in June, from €32.4 billion in the year-ago month. The goods surplus rose to €39.8 billion, from €32.6 billion in the prior month, while services surplus grew to €17.3 billion, from €16 billion.
Construction output in the Eurozone grew by 1% year-over-year in June, versus a decline of 2.1% a month ago. This was the first gain in the bloc’s construction activity since January 2024.
Germany’s producer prices declined by 0.8% year-over-year in July following, a 1.6% decline a month earlier. The figure came in-line with market expectations and represented the 13th straight month of producer price deflation.
Weakness in the US dollar, due to speculations of the Federal Reserve cutting interest rates during each of its three policy meetings this year, provided a boost to the EUR/USD forex pair on Tuesday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.4% to 101.44.
The EUR/USD gained around 0.4% to reach 1.1131 on Tuesday. The STOXX Europe 600 Index declined by 0.45% to settle at 512.27.
What to watch: Investors await comments from Fed Chairman Jerome Powell at the Jackson Hole symposium scheduled at the end of the week, to get some insights into the timing and extent of interest rate cuts.
Data on manufacturing and services PMI from the Eurozone, due to be released on Thursday, will also remain in focus. The HCOB Eurozone manufacturing PMI, which came in unchanged at 45.8 in July, is expected to edge higher to 46 in August. Analysts expect services PMI to rise to 52 in August, from 51.9 in July.
Context: Shares of Lowe’s edged lower on Tuesday, even after the company reported upbeat earnings.
Details: Sticky inflation levels and high interest rates have weighed on bigger ticket consumer discretionary spending, impacting the overall sales of Lowe’s Companies. The company witnessed soft demand for big-ticket home projects, such as flooring and kitchen renovation. Lowe’s comparable sales declined by 5.1% in the quarter.
Quarterly revenues came in at $23.586 billion, missing Wall Street expectations of $24.013 billion. However, the company still managed to report adjusted earnings of $4.10 per share, beating consensus estimates of $3.99 per share.
“The company delivered strong operating performance and improved customer service despite a challenging macroeconomic backdrop, especially for the homeowner. At the same time, we continue to build momentum with our Total Home strategy reflected by our mid-single-digit positive comps with the Pro customer this quarter,” CEO Marvin Ellison said during the earnings call.
Management lowered their forecasts for the year, citing weak DIY sales amid macro challenges. They projected total sales of $82.7 billion to $83.2 billion, compared to the prior forecast of $84 billion to $85 billion. Comparable sales are now projected to decline by 3.5% to 4.0%, compared to the previous forecast of 2% to 3%.
Lowe’s also lowered its guidance for adjusted earnings to between $11.70 and $11.90 per share, from its prior guide of $12.00 to $12.30 per share.
How shares responded: Lowe’s shares slipped 1.2% to close at $240.33 on Tuesday, following the release of quarterly results. The stock has gained around 7% over the past six months.
What to watch: Investors will continue monitoring overall inflation levels and the US central bank’s monetary policy, which are expected to impact the company’s overall results ahead.
Other Markets: US trading indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.15%, 0.20% and 0.24%, respectively.
Russia said its military forces had taken control of Ukraine’s town of New York. The news sent the RUB/USD slightly higher in forex trading this morning.
Australia’s Westpac-Melbourne Institute Leading Economic Index came in flat in July, lending support to the AUD/USD forex pair.
Japan’s trade deficit widened to ¥621.84 billion in July, from ¥61.33 billion in the year-ago month. The latest reading was worse than market expectations of a deficit of ¥330.7 billion and sent the JPY/USD pair lower in forex trading this morning.
South Korea’s Business Survey Index for the manufacturing sector declined to 71 in August, from 73 in the prior month. The latest reading being the weakest since March exerted pressure on the KRW/USD forex pair.
The API said that US crude inventories rose by 0.347 million barrels in the week ending August 16, compared to a decline of 5.205 million barrels in the prior week, which sent the WTI crude oil prices lower this morning.
UK’s public sector net borrowing, Indonesia’s loan growth and Bank of Indonesia’s interest rate decision, South Africa’s inflation rate, India’s money supply M3, Canada’s producer price inflation and raw materials price index, US MBA mortgage applications, crude oil inventories, gasoline stocks change, distillate stocks and FOMC minutes, Russia’s producer price inflation, as well as Argentina’s economic activity estimator.
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