Today’s busy schedule of economic data releases kept forex traders active, following significant dollar moves last night. The US currency retraced some of the losses against most of its peers during the early European trading, but those gains were short lived as the greenback’s weakness unfolded ahead of the construction spending and PMI data releases.
The European session kicked off with a set of PMIs out of the eurozone and its member countries, followed by the eurozone GDP figures for the second quarter and German unemployment data. In the UK, figures pointing to a manufacturing recovery were of main interest. The eurozone economy accelerated slightly to 0.6% quarter-on-quarter in the three months ending June, in line with analysts’ expectations. In the previous quarter, growth was revised down however, from 0.6% to 0.5%. On a 12-month basis, GDP growth edged up from 1.9% to 2.1%, also in line with forecasts and the highest since the final quarter of 2015. Among the released PMI numbers, highly watched figures out of Germany showed that the manufacturing sector there recorded a solid gain last month, though at a slower rate than in June as new orders came in more slowly. The index fell to 58.1 in July’s final reading from 59.6 in June, remaining above the 50-expansion mark.
The euro traded above the 1.18 mark against the greenback for most of the day, with the pair last trading at 1.1830, following yesterday’s rally on the back of dollar weakness.
Sterling rose to an 11-month high against the greenback, as today’s manufacturing data eased concerns of an economic slowdown. The PMI survey for July recovered from a seven-month low as it rose to 55.1 from a downwardly revised 54.2 in June and above expectations of 54.4. The rebound was helped by the biggest influx of new export orders since 2010, which offset tempered growth in manufacturing output. Investors are hoping that the upbeat figures will hearten policymakers at the Bank of England, which will make a policy decision and release its latest quarterly Inflation Report on Thursday. Pound/dollar surged following the survey release to 1.3233 to last trade at about the same level as the US session was under way.
The US morning session was similarly busy with an ample of data releases. Consumer spending barely rose, up 0.1%, in June as personal income stagnated for the first time in seven months due to a decline in dividend payments. Modest growth in consumer spending, which accounts for more than two-thirds of US economic activity, could signal a disappointing third quarter expansion. The personal consumption expenditures (PCE) price index, excluding food and energy, rose 0.1% in June m/m after a similar gain in May. Annually, the PCE index increased 1.5%, mirroring the prior month’s gain. The PCE index is the Federal Reserve’s preferred inflation measure. Meanwhile, the ISM report showed that US manufacturing expansion cooled in July to 56.3 from a reading of 57.8 the prior month, and narrowly missed expectations of 56.4.
Following all the released US figures, the greenback fell against the yen, last trading just below the 110-mark, while the dollar index hit a 15-month low of 92.77.
Looking at commodities, oil prices pulled back from their two-month high. WTI was last trading at $49.55 a barrel while Brent was at $51.95. Gold gained as demand for the precious metal rose on the back of dollar weakness. Gold was last trading at $1,272.70 an ounce.
