US factory activity data in focus
The global economic calendar heats up today, ending the week with a slew of key indicators. The just out data showed that UK’s factory activity advanced more than expected in June.
The Eurozone just witnessed the release of several optimistic data points, as the region’s manufacturing sector activity rose above expectations in June. Moreover, factory activity in Germany, the Eurozone’s largest economy, advanced to a 28-month high level in June. Going ahead, market participants look forward to the release of the Eurozone’s unemployment rate data. Later in the day investor attention will shift across the Atlantic, as the US manufacturing PMI data for June and construction spending for May is on the cards.
Pound Sterling – UK Markets
The Pound has extended its previous session losses against the US Dollar and the Euro this morning. The just out data showed that UK’s Markit manufacturing PMI rose above expectations to a 5-month high level in June.
Yesterday, Sterling came under renewed pressure and re-tested 31-year lows, after dovish comments by the Bank of England (BoE) Governor, Mark Carney, abruptly ended a tentative recovery in the currency. After the shock Brexit vote the Pound was witnessing a modest comeback of sorts during the past two days. The BoE chief sent strong hints that the central bank could cut interest rate by August in order to safeguard the economy from further shocks in the wake of last week’s Brexit decision. Mark Carney’s unambiguous speech quickly halted the Sterling’s recovery and also came as a harbinger of the downward pressure that the currency would witness in the coming months. On the data front, UK’s final first quarter GDP rose in line with market expectations.
US Dollar – US Markets
The greenback gained ground against the shared currency and the Pound yesterday, snapping two consecutive days of losses, after the BoE Governor, Mark Carney, indicated the need for additional stimulus in the UK and there was also speculation of more easing measures by the ECB. On the data front, the number of people filing for unemployment assistance in the US rose more than expected last week, but remained at a level that is associated with a healthy labour market. Factory activity in the US Midwest region returned to expansion in June, rising well above forecasts and notching its highest level in over a year led by strong gains in new orders and production, thus offering a ray of hope for the nation’s beleaguered manufacturing sector. Separately, the St. Louis Fed President, James Bullard, reiterated his view that the US central bank should introduce a single interest rate increase this year.
Moving ahead, market participants await the release of US ISM manufacturing and Markit PMI for June along with the nation’s construction spending data for May, due later today.
Euro – European Markets
The shared currency is trading mixed against its major peers this morning. Data released earlier in the session showed that the Eurozone’s factory activity unexpectedly advanced to a 6-month high level in June. Moreover, the Germany’s manufacturing PMI rose to a 28-month high level in June, mainly led by a robust increase in domestic and foreign demand. Meanwhile, in Spain and Italy manufacturing sector activity rose above expectations in June. French manufacturing activity slightly advanced in June, but remained in contractionary territory for the fourth consecutive month. Going ahead, investors look forward to the Eurozone’s unemployment rate data for May which is expected to post a slight decline.
Yesterday, the Euro ended lower against the US Dollar, after a Bloomberg report suggested that the European Central Bank (ECB) could introduce further easing measures. However, this was later denied by an ECB press officer. On the data front, inflation unexpectedly returned to the Eurozone in June for the first time in five months, thus reinforcing belief in the ECB’s efforts to fight deflation.
Other Currencies – Highlights
The Japanese Yen has trimmed most of its previous session losses and is trading higher against the greenback this morning. Earlier in the session, data showed that Japan’s consumer confidence index improved above expectations to a 5-month high level in June. Additionally, the nation’s unemployment rate held steady at 3.2% in May. Also, the job-to-applicant ratio came in better than expected, suggesting that the level of job availability is still high and the nation’s jobless rate could go lower in the coming months.
In other economic news, the Bank of Japan's (BoJ) closely watched Tankan report showed that business sentiment among large manufacturers held firm in the second quarter of this year. Further, confidence among Japan’s small firms and non-manufacturers worsened during the same period. Shortly prior to this, Japan’s official data showed that household spending fell in May and inflation dropped for a third month in a row, thus increasing the chances of further monetary easing at the BoJ’s next meeting. Separately, Japan’s manufacturing activity recorded a fourth straight month of contraction in June.