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The Euro-Zone June PMI manufacturing index was revised slightly lower to 43.4 from the flash reading of 43.6 and confirmed at a 37-month low. With weak demand conditions there was a second successive decline in output prices and the sharpest decline for three years.

The Euro moved lower after the European open with a retreat to 1.0870 before finding support and regaining ground into the US open.

Bundesbank head Nagel stated that inflation is not retreating as the bank would like it to and there is still some way to go with policy tightening.

He did, however, add that doubts surrounding the need for further rate hikes will grow and that critical voices are becoming louder.

The ISM manufacturing index declined to 46.0 for June from 46.9 previously. This was below expectations of 47.2 and the lowest reading since June 2020. The manufacturing sector has also been in contraction for eight successive months. Production dipped into contraction for the month while new orders contracted for the 10th successive month, although the rate of contraction eased slightly. Companies also reported job losses for the month with inventories also contracting.

The prices index remained in contraction and posted the sharpest decline for six months.

The dollar dipped lower after the report with a Euro spike to 1.0935, but it was unable to hold the gains and retreated to the 1.0900 area. Tight ranges prevailed on Tuesday with the Euro settling fractionally above the 1.0900 level. Trading conditions will be subdued on Tuesday with US markets closed for a holiday.




The dollar posted net gains after Monday’s European open, but was unable to challenge the 145.00 level in choppy trading conditions. Treasuries posted gains after the US ISM manufacturing data with the 10-year yield dipping to below 3.80% and the dollar spiked to lows at 144.00 before a limited bounce.

Treasuries failed to hold the gains and the dollar recovered ground as yields moved higher.

There were no comments from Federal Reserve officials during the day which tended to dampen activity with markets still expecting a July rate hike.

Markets remain wary over the threat of Japanese Finance Ministry intervention to support the yen which curbed potential dollar buying, especially as there will be a lack of liquidity on Tuesday due to the US holiday. The dollar consolidated around 144.60 on Tuesday with narrow ranges prevailing




The UK June PMI manufacturing index was revised up to 46.5 from the flash reading of 46.2. Input prices declined at the fastest rate since early 2016 and output prices also declined for the first time in seven years, reinforcing expectations that inflation would not be a significant feature within manufacturing.

In comments on Monday, incoming Bank of England Monetary Policy Committee member Greene stated that it would be a mistake for central bankers to take comfort in the notion that inflation and interest rates will automatically go back to low levels seen before the pandemic.

She also commented that the Bank of England may have a tough job in returning inflation to the 2% target.

The rhetoric reinforced expectations that Greene would be more hawkish on the committee than outgoing member Tenreyro.

Sterling overall was unable to make any headway during the day and retreated to lows around 1.2660 against the dollar before a limited recovery while the Euro was held just below the 0.8600 level. Sterling consolidated just below 1.2700 on Tuesday with the Euro just below 0.8600.




Swiss consumer prices increased 0.1% for June compared with consensus forecasts of a 0.2% increase with the year-on-year inflation rate declining to 1.7% from 2.2% and slightly below market expectations of 1.8%. The inflation rate has, therefore, dipped below the National Bank 2.0% target.

The Swiss PMI manufacturing index edged higher to 44.9 for June from 43.2 previously, but remained in contraction territory.

Swiss sight deposits declined to CHF491.9bn in the latest week from CHF508.0bn the previous week which suggests that the National Bank is still looking to tighten domestic liquidity conditions. The weaker than expected data triggered franc losses, but it recovered from intra-day lows. The Euro settled just below 0.9790 while the dollar failed to hold the 0.9000 level and retreated to 0.8970. There was little net change on Tuesday with the dollar still around 0.8970.

Technical Levels 

4 7 2023



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