Eurozone PMIs Beat, EUR/USD Holds Near 1.17 After Bessent

The dollar ended last week broadly unchanged after an initial selloff on Treasury Secretary Scott Bessent's announcement of increased long-end bond buybacks. EUR/USD held near 1.17 Monday, supported by stronger-than-expected euro area PMIs.

Euro area composite PMI rose to 52.1 in August, above the consensus of 51.7. Manufacturing jumped to 52.8 from 51.9. Services rose to 51.7. The strength came from southern Europe, offsetting weakness in Germany and France. Negotiated wages rose 2.44% year on year in the second quarter, down from 2.56% in the first quarter, in line with the ECB's wage tracker, economists said.

UK PMIs also surprised to the upside. The composite index rose to 52.5 from 52.2, driven by a services print of 52.8 against a consensus of 51.8. The composite output price index jumped to 57.1 from 56.1. Input prices also climbed. Markets interpreted the data as hawkish, traders said, pricing one more Bank of England rate hike by year-end and two in total. Sterling gained, lifting GBP/USD above 1.31.

US PMIs were mixed. The composite index rose to its fastest since March 2022. Manufacturing weakened to 53.2 from 53.9. Services surged to 56.8 from 54.6. Input and output price indices declined. The data did not provide a clear directional signal for the dollar, economists said. The focus now shifts to Jackson Hole, where Fed Chair Kevin Warsh speaks Friday.

In Scandinavia, the Riksbank's dovish stance pushed Swedish rates to outperform and the krona weaker, traders said. The Swedish labour market print Friday offered some counterweight. Unemployment fell to 8.6% in July from 8.9%. Employment rose 0.8% month on month. The details were even better, with U4 unemployment falling more than the headline rate. The monthly data is notoriously volatile. "The outcome is more noteworthy than usual and broadly erases that negative narrative," said analysts at a Nordic bank.

Danish consumer confidence improved to -13.1 in August from -14.7, the highest since February, though still low historically. Business confidence rose to 106.7, the highest since April 2022, driven by services and retail. Construction and industrial production remain near the neutral 100 level.

Brent crude oil dropped to around $93 a barrel after a sharp weekly rally. Investors took profits ahead of the expected US sanctions announcement, traders said. Bessent described the sanctions as the "toughest" in history, calling them an "economic D-Day". Iran warned that no oil will flow from the Gulf if the "economic war" continues. The lack of meaningful negotiations means the prospects for a deal are slim in the short term, analysts said.

The oil price decline weighed on the Canadian dollar. Canada also faced headwinds from Prime Minister Mark Carney's announcement of dollar-for-dollar retaliatory tariffs on selected US imports. The duties respond to new 50% US tariffs on Canadian exports worth about $20 billion and take effect September 8.

Equities closed higher Friday. Several markets ended the week lower, most notably in the US. The Nordics were one of the strongest regions. The VIX hovered around 15.5 and ended the week unchanged. Sector performance showed no defensive rotation: materials best, utilities worst. Southern Company (SO, Alpha Score 40/100) was among the utilities that lagged. Macro and earnings data remain supportive, economists said. Asian markets were mostly lower Monday morning, with South Korea seeing the greatest volatility. US and European equity futures traded near Friday's closing levels.

This week, the main event is Jackson Hole. Markets will watch for any signal from Fed Chair Warsh on the rate path. In Sweden, the Riksbank minutes and GDP data are due later in the week.