The euro and pound retreated against the dollar on Thursday as economic data pointed to increased prospects of recession in Europe.

Global stock markets recovered some ground after another battering this week, while oil prices extended losses.

Economic growth in the eurozone plummeted in June, a key survey showed, as high prices took the wind out the strong recovery from the deep lows of the coronavirus pandemic.

The closely-watched monthly purchasing managers' index by S&P Global slumped to 51.9 from 54.8 in May. A figure above 50 indicates growth.

PMI data also revealed that Britain's private sector business activity is languishing at its lowest level for more than a year on decades-high inflation.

The surveys weighed on Europe's major currencies, with foreign exchange markets seen as a clearer indicator of a country's economic health compared with stock markets that feature many multinationals.

Foreign exchange markets [are] seen as a clearer indicator of a country's economic health compared with stock markets that feature many multinationals

"The global economy continues to be afflicted by severe supply shocks, which are pushing up inflation and driving down growth," noted Citi analyst Nathan Sheets, adding the likelihood of recession had reached 50 per cent. 

Commentators have warned for some time that the world economy could be heading for contracting growth owing to the sharp increase in global interest rates aimed at cooling inflation.

Federal Reserve boss Jerome Powell on Wednesday said recession in the short term was "certainly a possibility".

He said "inflation has obviously surprised to the upside over the past year, and further surprises could be in store".

The Fed this month hiked US interest rates by 75 basis points and is expected to do the same in July, with some observers predicting two more such moves after that.

Deutsche Bank CEO Christian Sewing also said there was a 50 per cent chance of a contraction next year.

Elon Musk, JP Morgan boss Jamie Dimon and economist Nouriel Roubini are among several others to have made similar forecasts.

The prospect of a retreat in the global economy continued to drag on oil prices as traders fretted over slowing demand. 

Brent and WTI have slumped over the past week, even with sanctions on Russian crude exports and China's gradual reopening from lockdowns.

Adding to the selling of crude was data on Wednesday indicating a jump in US stockpiles.

"A slowdown in global growth is a risk to oil demand, which could help ease some of the tightness in the market," said Warren Patterson of ING Group. 

"Already, we have seen demand estimates revised lower."

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