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Positive economic activity stabilizes dollar

USD - United States Dollar

US economic activity in the manufacturing sector grew in July, with the overall economy notching a third consecutive month of growth, according to a monthly survey of purchasing managers released this morning.

The Manufacturing ISM® Report on Business® stated that the July purchasing manager’s index registered 54.2 percent, up 1.6 percentage points from the June reading of 52.6 percent. This figure indicates expansion in the overall economy for the third month in a row after a contraction in April, which ended a period of 131 consecutive months of growth.

The PMI is considered a leading indicator of economic health. Businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy.

The actual reported data came in higher than the forecasted data, and the US dollar had a small bounce against the euro and pound. The dollar had reached lows against both currencies last week.

Key Movers

The pound will be itching to pick up from where it left off this week after we saw GBP/USD break 1.30 for the first time since March’s ‘Black Tuesday’. Although a large part of the surge is attributed to US dollar weakness, it is likely the pound will start to strengthen against several its other major peers.

The contraction in the Eurozone economy in the second quarter was slightly worse than expected. France and Italy performed better than expected but Spain disappointed. Like the US, these numbers show the extent of COVID-19 damage on the Eurozone economy. However, unlike the US, the recovery fund and relative containment of virus cases in Europe should lead to a stronger recovery.

Expected Ranges

USD/CAD: 1.339 - 1.244 ▼

GBP/USD: 1.300 - 1.311 ▲

EUR/USD: 1.170 - 1.179 ▲

USD/AUD: 1.398 - 1.413 ▲