Weak PMI numbers were reported from China, the UK and the euro zone while Switzerland was stronger. Traders are anticipating US PMI and payrolls data later this afternoon that could disappoint to the downside.
China reported better than expected numbers at 52 on forecasts of 51.6, but the data from May is the lowest over the past 9-months. This highlights the slowdown in the Chinese economy after a series of interest rate hikes and other tightening measures Chinese officials have taken to slow the pace of economic growth and inflation rates.
The euro is consolidating its recent gains following a disappointing manufacturing PMI reading of 54.6 on expectations of 54.8. Earlier the EUR/USD failed to move above 1.4450, the 50% retracement from the slide in May. A breach above 1.4450 could tack on another $0.015 to the pair. To the downside 1.4345 is the first support.
Further brinkmanship is being played out in negotiations between the IMF, the EU, and Greece. The IMF refuses to release the next tranche of aid before funding guarantees are made by the EU, while the EU will not pledge funding until the IMF commits. As the two parties negotiate an agreement the market appears to have priced in a new loan package for Greece that at least buys additional time to work out a final settlement. Risks remain in the afternoon session of an off the cuff remark by an EU official that could send the euro lower, albeit temporarily.
Sterling is lower following weak UK PMI data (52.1 on expectations of 54.2) with the GBP/USD falling briefly below 1.6400 before recovering to 1.6420. A previous attempt to establish a beachhead above 1.6500 failed and risks remain for further declines. The support at 1.6300 may be a likely target.
The Swiss franc rebounded from yesterday’s weaker than expected GDP numbers after strong PMI data were released this morning. The USD/CHF traded at a new low of 0.8442 while the EUR/CHF fell back to 1.2180. The next support for the pair stands at Friday’s low of 1.2100.
This afternoon risks run high for disappointing US ISM data as well as the ADP jobs report. Based on the stagnant GDP growth in the US as well as a slowdown in global manufacturing (see the above Chinese, EU, and UK PMI numbers above) the USD could receive a bid in the afternoon trading session.
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