The euro retreated from fresh 23-month highs set earlier in the day as the single currency was hurt by disappointing PMI data out of the Eurozone. The US dollar came off its lows but remained near the 13-month lows reached during the Asian session, while oil reversed higher on OPEC’s latest efforts to curb supply.
Eurozone PMI releases by IHS Markit dominated the European trading session on Monday as the data missed expectations on all fronts. The composite PMI for the euro area fell to 55.8 from 56.3 in July’s flash reading, missing forecasts of 56.2. The manufacturing component was the worst hit with the sector’s PMI dropping from 57.4 in June to 56.8 in July. Expectations were for a reading of 57.2. The services PMI was unchanged at 55.4 but this was slightly below forecasts of 55.5.
The figures suggest economic activity in the Eurozone expanded at its slowest pace in six months in July as the number of new orders moderated. However, for the third quarter as a whole, GDP in the region remains on track to grow by a solid 0.6%.
The euro had hit a near 2-year high of $1.1684 during Asian trading as the dollar suffered from the latest episode in the White House. But the single currency fell back to around $1.1640 in late European trading. It also lost ground against the yen and sterling, dropping 0.5% to 129.01 yen and 0.8928 pounds.
The resignation on Friday of the White House’s press secretary, Sean Spicer, added to the dollar’s woes, further denting hopes of a fiscal stimulus in the United States anytime soon. The US currency managed to steady however after touching fresh lows earlier in the day. The dollar index hovered around the 94 level at it attempted to moved away from its earlier 13-month low of 93.82. However, against the yen, despite recouping some of its losses, it stood down on the day at around the 111 level.
Data out of the US today provided little support to the greenback. The IHS Markit manufacturing PMI for the United States rose from 52.1 to 53.2 in July, beating forecasts of 52.0. The services PMI also came in above expectations, increasing from 53.0 to 54.2 in July, against forecasts of 54.0. Housing data was not as positive however, as existing home sales fell by 1.8% month-on-month in June, which was worse than expectations of a 1% drop.
The pound had a stronger start to the week following sharp losses the prior week when it came under pressure on Brexit uncertainty and doubts about the prospect of higher UK interest rates. Sterling rebounded back above 1.30 level on Monday and was last trading at $1.3041 as investors eyed UK GDP data for the second quarter later in the week.
In commodities, gold climbed to 4-week highs, hitting $1258.79 an ounce in European trading on the back of the increased risk aversion in financial markets today. Oil was also up, with both WTI and Brent crude gaining over1% after Saudi Arabia said it will reduce exports in August.
At a meeting of OPEC and some non-OPEC countries in St. Petersburg today, Saudi Arabia committed to cap its exports of crude oil at 6.6 million barrels per day in August, which represents a 1 million reduction from one year ago. It was also announced that Nigeria would limit its output at 1.8 million barrels per day, though no such decision was made for Libya, which along with Nigeria, is exempt from OPEC’s cuts.
US crude was last up at $46.40, while Brent crude was trading at $48.66 a barrel.