The dollar was up versus sterling and the safe haven yen and Swiss franc following disappointing UK PMI data. Weak US PMI data would likely feed into additional USD strength heading into the holiday weekend and slow the market commentary about a rebound in risky assets.
UK manufacturing PMI declined to 51.3 on consensus forecasts of 52.2. The negative tone of the report was emphasized by the reduction of last month’s numbers to 52.0 from 52.1. With UK manufacturing slipping this ends a dreadful week of UK economic data that began with a larger increase to the current account deficit and a flat HPI index. Sterling was down at the 1.60 level and for the day and really failed to capitalize in the “risk-on” environment. Next week’s UK interest rate decision and MPC notes could reflect the committee’s deteriorating assessment of the UK economy. Sterling may have further downside and a close below the March low at 1.5935 would put the bears in charge.
The euro is even versus the dollar but up in the crosses as traders unwind short bets against the 17-nation currency, particularly in the EUR/CHF which has rallied 3.7% this week. Expectations that the EU/IMF may transfer the 5th tranche of the Greek bailout as early as this weekend has offered the euro support and has the safe-haven Swiss franc and Japanese yen trading lower versus the dollar. Euro zone PMI was flat and did little to support the currency. The EUR/USD hasn’t been able to overcome the falling resistance line from the May and June highs and a failure today might reduce the momentum behind the recent move.
Today’s US PMI data will do a lot to reinforce/discredit the “risk-on” talking heads who site a short term rally in risky assets such as US equities and crude oil while general safe-havens such as gold has pulled back. Next week’s jobs report is also key.
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