US Manufacturing PMI Data Eyed
An unexpected fall in the Euro zone’s manufacturing sector PMI for May has raised worries about growth in the region’s economy and whether the European Central Banks’ (ECB) aggressive monetary expansion is having the desired impact on the region’s manufacturing sector. However, services PMI for the month held steady, even as it lagged expectations. Going forward, investors will eye the Euro zone’s consumer sentiment index scheduled later today.
Across the Atlantic, investor focus will be on the preliminary reading of the US manufacturing PMI due for release later in the day. Also on tab will be speeches by key US Federal Reserve (Fed) officials for further clues on the direction of US interest rates.
Pound Sterling – UK Markets
On Friday, the Pound ended on a weaker footing against the US Dollar and the shared currency, following gains in previous sessions. On the data front, a report by the Confederation of British Industry showed that Britain’s industrial trends orders surprisingly advanced to a five-month high level in May. This report closely follows on the heels of a robust UK retail sales report, released last week, raising hopes that growth for the nation’s gross domestic product (GDP) could hold up better in the second quarter.
With no economic releases lined up in the UK today, market participants will focus on the nation’s second estimate of GDP for the first quarter of this year, due later this week. In addition to this, Britain’s public sector net borrowing and Nationwide housing inflation index, along with the country’s consumer confidence and mortgage approvals report will be closely followed by investors.
US Dollar – US Markets
The US Dollar is trading lower against the Pound this morning. Looking ahead, market participants await the release of the US Markit manufacturing PMI data for May, due later today. Expectations are for the index to post a modest increase, after reports by two regional US Fed banks released last week pointed towards weakness in the nation’s manufacturing activity. The New York Fed’s Empire State index and the Philadelphia Fed’s regional manufacturing benchmark dropped into negative territory in May, indicating that the US manufacturing sector is still on shaky ground. Further, speeches by three Fed officials will also be closely watched by investors today to gauge whether their message is in sync with the April Fed minutes. Moving forward, the spotlight will be on the revised estimate of US first-quarter growth, due later this week.
On Friday, data showed that US home resales rose for a second straight month to reach a three-month high level in April, suggesting that the economy continues to gather steam during the second quarter.
Euro – European Markets
The shared currency is trading lower against its major peers this morning after the just out data showed that the preliminary reading of the Euro zone’s manufacturing and services PMI data for May missed market expectations and the region’s composite PMI index dropped to a sixteen-month low level in May. On the other hand, in Germany, the Euro zone’s largest economy, manufacturing and services PMI readings reached a five-month and a three-month high level, respectively. Moreover, the nation’s composite PMI registered its highest reading since December 2015. German manufacturers and service providers both reported robust growth in May, mainly due to the processing of backlogs and increased new orders. In addition to that, contrasting trends were seen in the service and manufacturing sectors in France. The nation’s service sector expanded more than anticipated while the manufacturing sector fell short of expectations in May.
On Friday, the Euro pushed higher against the dollar, pulling back from seven-week lows, after data indicated that the region’s current account surplus increased to a four-month high level in March.
Other Currencies – Highlights
The Japanese Yen is trading on a stronger footing against the greenback this morning. Earlier in the session, data showed that Japan’s merchandise trade surplus widened to a six-year high in April, following a sharp decline in the nation’s imports. Meanwhile, Japan’s Nikkei Flash Manufacturing Purchasing Managers' Index (PMI) deteriorated at the steepest pace in over three years in May, mainly driven by a sharp decrease in new orders.
In other economic news, the final reading of Japan’s leading economic index, which measures future economic activity and the final coincident index that reflects the nation’s current economic activity, both advanced in March. Separately, the Bank of Japan's Deputy Governor, Hiroshi Nakaso, defended the central bank’s negative interest rate policy and indicated that Japan’s employment and household income situation have shown a steady recovery. Moving ahead, market participants will look forward to Japan’s national consumer price index for April, scheduled for release later this week.