Pound falls to new eight-year low against euro; Draghi defends QE - as it happened

• Pound hit by Brexit fears as data strengthens euro
• Draghi says QE and forward guidance have been a success
• Eurozone manufacturing sees best performance since 2011
• Germany shows strong growth in August
• French manufacturing beats forecasts but services disappoints

1.59pm BST

On the economic front, it was all eyes on Europe today.

France saw its manufacturing sector move higher in August but services disappoint, while Germany continued to power ahead.

1.28pm BST

Here's a nice graphic showing the pound's recent decline:

WSJ's Daily Shot: British pound is having a terrible month https://t.co/vQmOfXHYNP via @WSJ pic.twitter.com/N4lpbxr3jF

12.56pm BST

More on the pound's fall against the euro - how low can it go?

#Brexit's gravity is pulling the pound toward euro parity: @ScouseView https://t.co/Mox3djVhCK via @gadfly pic.twitter.com/LIFkyotl9m

12.18pm BST

Despite QE and low interest rates, central banks must do more to boost incomes, says Edward Smythe, economist at research and campaign group Positive Money:

The likelihood of an exit from QE in the eurozone and elsewhere is diminished by the persistence of below-target inflation. The proliferation of low-wage, irregular and insecure jobs means that wage pressures - and therefore spending power - are subdued even as unemployment falls.

If policymakers wish to unwind QE, and bring interest rates back to their pre-crisis levels, they must do more to boost incomes on a structural basis. This means moving monetary policy away from exhausting a wealth effect stimulus, to generating demand that is sustainable.

11.39am BST

Worries about Brexit are among the factors contributing to the pound's current woes. Connor Campbell, financial analyst at Spreadex, said:

After an incredibly flat start the pound took a dive this Wednesday, the currency infected by a bout of Brexit bearishness.

There's not really been much to force sterling lower against the dollar and the euro. The former has admittedly seen something of a comeback this week following a fortnight of macro-economic losses; the latter, meanwhile, received a bit of a boost from a better than expected Eurozone manufacturing PMI (even if the services reading was worse than forecast).

11.20am BST

And although Jackson Hole would be the perfect place for central bankers like Draghi to lay the foundation for upcoming policy moves it is by no means certain they will, says Craig Erlam, senior market analyst at Oanda:

If Draghi's comments today are anything to go by we should not get our hopes up. Draghi steered well clear of upcoming monetary policy decisions and if reports last week are to be believed, he may well do so again on Friday.

The ECB is clearly very concerned about the recent appreciation in the euro - despite an insistence that it does not concern itself with such matters - and recent "misinterpretations" by traders to Draghi's comments will likely mean he steers clear once again.

11.08am BST

The euro's current strength may not last if ECB boss Mario Draghi disappoints later this week at Jackson Hole:

Euro near 8 yr high vs pound - could be in for huge unwind if Draghi fails to deliver on JH tapering speech#EURGBP pic.twitter.com/1A6GrbO3wL

10.52am BST

It's time for our monthly healthcheck on the UK economy following Brexit, and there are signs things are picking up although there are worries about the outlook. Richard Partington writes:

Ministers are preparing for crucial Brexit talks this autumn against a backdrop of better news on jobs, inflation and the public finances as the UK economy displayed signs of stability after a volatile start to the year, a Guardian analysis shows.

The Guardian's monthly tracker of economic news shows inflation coming close to its peak and the lowest levels of unemployment since the mid-1970s. However, the ever-present threat that rocky negotiations could knock business confidence, derailing the economy, remains.

Related: Brexit economy: outlook positive but rocky negotiations could bring instability

Related: How has the Brexit vote affected the UK economy? August verdict

Related: 'Growth is slowing in the UK, but picking up elsewhere' - experts debate Brexit data

10.44am BST

Meanwhile there is little sign of recovery in sterling so far.

It dipped below $1.28 against the dollar earlier for the first time since June and is still down 0.17% at $1.2802. Against the euro it is 0.3% lower at a1.0868.

has never been as weak against both the US dollar and euro as now. https://t.co/pJMCogCrWE

Interesting. Difference from 2008 is that when hit all time low vs Euro, it was still worth $1.44 cf $1.28 today. https://t.co/BYFgwPtvSC

10.31am BST

The pound may be weak at the moment but it could recover from here, says Yann Quelenn at Swissquote Bank;

One boost will come from UK Q2 GDP figures, to be released Thursday morning. They are expected to show robust, solid growth of 1.7% (annualised). Brexit negotiations are making slow progress, but we think the markets' fears of a Hard Brexit are overblown. The likelihood that all 27 remaining European Union member states will line up together against the UK is very low. (Indeed, the likelihood that they all line up together against anything is rather low.) The EU has a lucrative trading relationship with the UK, which it will not want to destroy.

There may be GBP weakness in the medium term, as investors show nerves, but the longer-term outlook is bullish.

10.13am BST

Mario Draghi's speech may have delivered little in terms of the future of QE but it was important in many respects, suggests David Owen, chief European financial fconomist at Jefferies:

Mario Draghi's Lindau Nobel laureate speech may not have directly addressed some of the markets current key concerns (how exactly the ECB intends to tweak its bond buying in 2018, the current level of the euro) but the speech was nevertheless important in stressing the role of academic research in driving the policy debate, both before well before the financial crisis, but more recently at the effective lower bound. Mario Draghi also highlighted the failure of the macro community to forecast the financial crisis, but how that too is being addressed.

A year ago we argued that the 2016 Jackson Hole symposium had missed a trick in not focusing on why equilibrium real interest rates were so low and the potential role for fiscal policy and structural reforms in driving recoveries forward. That will likely be addressed later this week given the title of this year's Jackson Hole "Fostering a dynamic global economy."

10.02am BST

EU MID SESSION UPDATE: No fireworks from Draghi in his Lindau speech, however EUR surges strong on Eurozone PMI'shttps://t.co/G4BhsGtJDp

10.00am BST

Here's a comparison of eurozone PMIs and GDP:

Private sector growth in the #eurozone remains elevated in Aug'. Headline Flash #PMI at 55.8, up from 55.7 in Jul'. https://t.co/tF8qocKeoq pic.twitter.com/ih1dZQAT8S

9.50am BST

The rebound in the euro following the strong eurozone data has given another whacking to sterling.

The pound is down 0.43% at a1.0853, a new eight year low. The UK currency has already been under the cosh on concerns about the outcome of the protracted Brexit talks.

9.41am BST

The lack of price pressures in the eurozone economy adds to the idea that Draghi will be cautious at Jackson Hole. Commenting on the latest figures, ING Bank's Bert Colijn said:

The Eurozone composite PMI increased from 55.7 to 55.8 in August as manufacturing sector growth improved significantly and service sector growth decreased somewhat. Both sectors' indices correspond to a healthy growth pace, but the question is whether this will also translate into an acceleration of industrial production this quarter.

Manufacturing PMIs in the Eurozone have been buoyant for quite some time now, but industrial production has failed to improve from its modest growth trend of recent years. As most indicators point to further recovery of manufacturing activity, we do expect to see some improvements in growth for the months ahead. The backlogs of work in manufacturing increased the fastest in 11 years, for example, an indication that stronger manufacturing output in the coming months is likely.

9.38am BST

This week's Jackson Hole meeting of central bankers is, as we have already suggested, not expected to provide much in the way of fireworks from the ECB's Mario Draghi. But what of US Federal Reserve chair Janet Yellen (who may well be leaving her post early next year and might want to spell out the Fed's direction of travel before that happens)?

Kully Samra, UK managing director at Charles Schwab, said:

It is tempting to view this year's Jackson Hole gathering of central bankers as the moment where we move from an age of quantitative easing (QE) to that quantitative tightening (QT), which sees a smooth reduction of gilt buying from the world's key central banks. The US Federal Reserve is leading the charge, and we expect to get more detail from Janet Yellen on the Fed's QT plan, in order to slowly unwind its bloated balance sheet. We have confidence that the Fed has little desire to jolt the financial markets, but it and the market are in uncharted territory as unwinding a $4.5 trillion balance has never been done historically.

Received wisdom has it that where the US leads the world follows and Mario Draghi's speech will be closely monitored for an indication that the curtain is about to fall on the ECB's QE experiment.

9.17am BST

A strong performance from the eurozone manufacturing sector has offset weak growth in services, according to an initial estimate of August's economy.

The IHS Markit manufacturing PMI rose from 56.6 in July to 57.4, better than the expected 56.3 and the highest level since April 2011. Eurozone factories were boosted by the best new export orders performance since February 2011.

The latest PMI readings for the eurozone signal a continuation of the recent strong performance of the currency bloc's economy. This stabilisation in the rate of expansion is pleasing, following signs of growth easing in recent months.

9.03am BST

The dip in France's service sector could be a cause for concern for jobs, said economist Julien Manceaux at ING Bank:

Preliminary PMI data for August sent mixed signals this morning. While in manufacturing the expansion seen in the second quarter of 2017 should continue, it seems that the expansion rhythm is slowing in the service sector, which could impact job creation. The labour market reform to be presented next week could shore up hiring intentions, but it is still far from a done deal.

Today's [manufacturing] PMI is a sign that the stronger than expected recovery in industrial production in the second quarter of 2017 (+1.2% quarter on quarter after -0.2% quarter on quarter in the first quarter of 2017) should continue in the second half of the year, boosted in part by the recovering building sector.

8.54am BST

Those German numbers show a positive performance this month for the country's economy.

The manufacturing PMI came in at 59.4, up from 58.1 in July and better than the expected 57.7 as the country's factories continued to turn in a strong performance.

#Germany Markit Manufacturing PMI Flash at 59.4 https://t.co/3ceK1Tkqaq pic.twitter.com/dvnqokbDnv

#Germany Markit Services PMI Flash at 53.4 https://t.co/67ci1U6XhK pic.twitter.com/oF5Iw8BFFv

#Germany Markit Composite PMI Flash at 55.7 https://t.co/pLUA65WmuN pic.twitter.com/YhzuFTwvJq

8.46am BST

The euro has moved off the day's lows, up 0.1% on the day against the dollar with the pound down 0.17% to a1.0882.

But analysts believe this has less to do with Draghi and more to do with the German PMI figures which have been released at much the same time (more on that in a moment).

think that may have been German PMI's Karen - unless I missed something

8.41am BST

Here's a live link to Draghi's speech on Bloomberg:

Mario Draghi @ecb gives Lindau speech ahead of Jackson Hole event --- live @BloombergTV https://t.co/Dkx5redYFN pic.twitter.com/liUMhMDPrC

8.39am BST

#ECB's #Draghi has nothing new to say to traders in the markets really ... this is a speech written for academics possibly by academics

8.39am BST

The ECB's policy of economic stimulus has come under criticism, not least from Germany for its negative effect on savers.

Draghi defends the moves as based on solid research:

A policy response that has its foundation in rigorous research is less prone to being impaired by political compromise and easier to explain to the general public.

... Keynes is often quoted as saying, "When the facts change, I change my mind. What do you do, sir?" Well, for policymakers, it is not that simple, and research helps us to decide whether a change in the facts deserves a policy response or, as we say, we should look through it....

We must be aware of the gaps that still remain in our knowledge. Our mainstream macroeconomic models still have little to say, for instance, about the non-linear propagation of shocks, the distributional impacts of policies, or how endogenous firm entry and exit can affect economic performance. Policy actions undertaken in the last ten years in monetary policy and in regulation and supervision have made the world more resilient.

But we should continue preparing for new challenges.

8.33am BST

ECB boss Mario Draghi's speech has been released, and is a run through of the financial crisis and the authorities' response to it.

Entitled The interdependence of research and policymaking there seem few hints as to the future plans for the bank's QE programme.

Economic research has also evolved in its thinking of how central banks should respond to an emerging crisis, particularly when their standard monetary policy instrument, typically a short-term interest rate, reaches its effective lower bound. At the lower bound, monetary accommodation cannot be provided through further reductions in short-term interest rates and policy must become non-standard.

One option is to rely on forward guidance, i.e. to promise to keep interest rates low for longer in the future. Such commitments, if credible, lower longer-term interest rates and provide economic stimulus even if the current interest rate remains unchanged. While forward guidance is a useful instrument, recent research has highlighted that its effectiveness can be improved if combined with other non-standard monetary policies.

8.18am BST

It is a downbeat opening for European markets, as investors remain cautious thanks to the continuing geopolitical concerns - North Korea, Trump - and ahead of the central bankers meeting at Jackson Hole.

The FTSE 100 has fallen 0.1%, not helped by the drop in advertising giant WPP. Germany's Dax has opened down 0.1%, France's Cac is 0.2% lower, Spain's Ibex is flat and Italy's FTSE MIB has edged up 0.05%.

8.13am BST

Advertising giant WPP has seen its shares slide in early trading after the group cut its full year net sales target. It dropped as low as 13.93, down 12%, before recovering a little to its current 14.70, down 8%. Mark Sweney reports:

Sir Martin Sorrell's WPP is facing its worst year in a decade as the world's largest advertising group was forced to slash growth forecasts for the second time after sales went into reverse in the first half.

The company cut its full-year growth forecast for revenues and net sales to between zero and 1% after reporting a marked deterioration in the second quarter that missed City expectations by some distance.

Related: WPP faces worst year in a decade as advertisers cut spending

8.06am BST

France's manufacturing sector has beaten forecasts although the services side came in slightly below expectations.

The flash manufacturing PMI for August rose from 54.9 to 55.8, better than the forecast of 54.5. This was the fastest pace for more than six years.

#France Markit Manufacturing PMI Flash at 55.8 https://t.co/IxQ6ZMYHt1 pic.twitter.com/rfPXtW8hNS

#France Markit Services PMI Flash at 55.5 https://t.co/7vBIs85sQM pic.twitter.com/7MlEbCsgFY

#France Markit Composite PMI Flash at 55.6 https://t.co/sMUoVyMkA0 pic.twitter.com/APIzzCeDDp

7.59am BST

However:

Don't get too excited on Draghi appearance at #LiNoEcon. Those hoping for QE clue will be probably left empty handed as no questions allowed pic.twitter.com/gLBUBQyqgd

7.55am BST

More on Draghi, with Konstantinos Anthis at ADS Securities suggesting the ECB president may not be able to avoid giving some hints as to the bank's thinking on the future of its economic stimulus package:

The stakes are high for Mario Draghi during the Jackson Hole Symposium as he is expected to avoid talking about tapering at this point in an attempt to soften the euro but it will be virtually impossible for him to successfully sidestep any questions regarding the matter. A good precursor of what the ECB President will talk about will be his speech in Lindau, Germany today and if he hints on a bearish bias ahead of the weekend meeting in Wyoming then the Euro will drive towards 1.1700.

7.43am BST

The speech from ECB boss Mario Draghi may indeed be a damp squib, reckon analysts at RBC Capital Markets:

This morning, ECB Mario Draghi is scheduled to speak at an event in Lindau, Germany. The ECB's website has the Draghi address beginning at 8:25 BST with the text of the address published on the ECB website. As we have argued before when it comes to his Jackson Hole appearance later this week (Friday), we doubt that the ECB president will have anything substantially new to say ahead of the crucial ECB meeting on 7 September. He is more likely to repeat the mantra of patience, persistence and prudence rolled out at the ECB's equivalent of Jackson Hole in Sintra, Portugal, earlier this summer.

7.37am BST

Here are the opening calls for Europe from IG:

Our European opening calls:$FTSE 7370 down 12
$DAX 12234 up 5
$CAC 5130 down 2$IBEX 10417 up 8$MIB 21711 down 19

7.37am BST

Good morning, and welcome to our rolling coverage of the latest news from the world economy, the financial markets, the eurozone and business.

We get the latest healthcheck of the eurozone economy today, with provisional August manufacturing and services numbers for France and Germany, as well as the bloc as a whole.

After a strong few months [Germany does] appear to be starting to show signs of plateauing. Expectations are for a modest decline from 58.1 to 57.7 in manufacturing, while services, which have been underperforming expected to pick up from 53.1 to 53.4.

The numbers from France are also expected to decline modestly with manufacturing slipping back to 54.5 from 54.9 and services to come in at 55.9, down from 56.0.

It was only a month ago that the head of the German IFO reported that business confidence had hit record highs in Europe's largest economy with sentiment amongst German businesses at euphoric levels. This in itself should have acted as a warning sign given that euphoria as an emotion tends to dissipate quite quickly and subsequently be followed by either melancholy or depression.

This appears to be what German investors are experiencing if yesterday's ZEW economic expectations is any guide, after it hit its lowest level this year, and a 10 month low.