Home Daily Commentaries USD strong after disappointing European PMI data

USD strong after disappointing European PMI data

Daily Currency Update

The US dollar index (DXY) continues its upward trend today, trading at 101.200 at the time of writing, up from Friday’s close of 101.085. The Flash Manufacturing Purchasing Manager’s Index (PMI) report was released at 49.0, above the forecasted 46.1. Flash Services PMI on the other hand came in at 52.4, below the expected 54.0. This PMI release shows that while there was still a rise in business activity overall in July, the service sector growth lost momentum. This is the slowest rate of expansion for the service sector in the last 5 months. The Chicago Federal Reserve National Activity Index was reported at -0.32, below the anticipated 0.03. This negative reading indicates growth below the typical trend of overall economic activity and related inflationary pressure. The market is expecting the Federal Reserve to announce a 25 basis point (bps) hike this week at their policy meeting.

Key Movers

Most news out of the Eurozone today focuses on the PMI reports showing the Manufacturing and Services PMI released today for major European economies. French Manufacturing PMI came in at 44.5, below the forecasted 45.4. French Services PMI was at 47.4, also below the expected 48.5. With these contractions in services and manufacturing, France has shown the sharpest reduction in business activity since November 2020. The German Manufacturing PMI is at 38.8, also below the forecasted 40.9. German Services PMI also came in below the expected 53.2 at 52.0. As German PMI moves into contraction, business expectations toward future activity are turning negative for the first time this year, which was reflected in weakening job creation numbers. Overall Eurozone data showed Manufacturing PMI at 42.7, below the forecasted 43.5. Eurozone Services PMI also came in down at 51.1 versus the forecasted 51.7. Eurozone business output fell at the fastest rate in eight months, marking a weak start to the third quarter. Markets are expecting a 25 bps hike from the European Central Bank (ECB) this week, to be announced on Thursday.

In the UK, Manufacturing PMI also dipped to 45.0 versus the expected 46.1 and Services PMI data reported at 51.5, below expectations of 53.1. Manufacturing in the UK fell for the fifth consecutive month and at its steepest pace since December 2022.

Minor gains for the Canadian dollar against the USD reinforce resistance in the 1.32 zone but extends its recent flat pattern as oil prices jump. West Texas Intermediate (WTI) crude oil continues climbing today to 77.74, approaching a crucial resistance level of 78. Canadian Wholesale data month-over-month fell -4.4% in June, from the previous 3.5% rise in May. This figure indicates a sharp contraction in the performance of the wholesale trade sector.

Expected Ranges

  • EUR/USD: 1.10656 - 1.11469 ▼
  • GBP/USD: 1.28071 - 1.28837 ▼
  • AUD/USD: 0.67149 - 0.67561 ▼
  • USD/CAD: 1.31820 - 1.32287 ▼