EUR / USD
The final Euro-zone PMI manufacturing reading for July was revised up to 62.8 from the flash reading of 62.6 even though the data releases for Spain for Italy were both below market expectations and also weaker on the month. Overall confidence in the manufacturing outlook held steady.
Narrow ranges prevailed ahead of the New York open with the Euro and dollar both unable to generate any momentum with the Euro capped below 1.1900.
The US PMI manufacturing index was revised higher to 63.4 from the flash reading of 63.1 with little impact.
The ISM manufacturing index declined to 59.5 for July from 60.6 the previous month and below consensus forecasts of 60.8. There was also a slight slowdown in the rate of growth in production and new orders while order backlogs were slightly higher.
After a marginal contraction the previous month, there was a limited net increase in employment for the month. Supply-side issues eased slightly on the month and prices also increased at a slightly slower rate, reinforcing speculation that overall inflation pressures could be in the process of peaking.
The dollar overall edged higher later in the New York session with the Euro settling around 1.1870, but with speculation that the global rebound was peaking.
Fed Governor Warner stated that inflation was well above the 2% target, but is expected to cool later this year and expectations are well anchored. There were, however, hawkish comments on the tapering issue as he noted that an announcement could be made in September if there are two more strong labour market reports with monthly job gains of close to 1 million per month. The comments increased expectations of a September announcement and emphasised the importance of this Friday’s jobs report. The dollar was marginally weaker on Tuesday with the Euro around 1.1875 as markets continued to monitor global risk conditions.
JPY
The latest IMF study suggested that the US dollar was overvalued by around 8.2% in 2020 with a range of 5.2%-11.2%. Risk appetite held firm in Europe on Monday, although the yen was resilient. The dollar overall was unable to make any headway ahead of the New York open and the yen was able to post net gains with buying support gradually strengthening on the crosses. US 10-year bond yields declined to 10-day lows below 1.20% which continued to erode US dollar support.
Overall, the dollar dipped to lows around 109.25 around the European close with the Euro retreating to around 129.80 and there was no recovery at the New York close.
Asian equities edged lower on Tuesday with the Chinese market undermined by another regulatory attack, this time on gaming stocks. US futures posted net gains, but the dollar was unable to regain ground with the dollar trading just below 109.20 and the Euro around 129.75 as the yen maintained a firm tone on the crosses.
GBP
The final UK PMI manufacturing index was unchanged from the flash reading of 60.4 with little impact in currency markets. Sterling gained initial support from the further merger-related activity which should lead to strong capital inflows, but it was unable to sustain the advance.
There was a little positive impact from the initial gains in equity markets and the UK currency gradually lost ground with no immediate evidence that investment funds were looking to move back into the UK currency. Markets continued to monitor delta-variant developments with a decline in the number of new cases.
From highs around 1.3930, there was a fresh retreat to below 1.3900 against the dollar while the Euro secured net gains to near 0.8550. There was a further correction after failing to break the 0.8500 level against the single currency and the UK currency was unable to regain territory.
Sterling stabilised on Tuesday but was unable to secure recovery as it traded just below 1.3900 against the US dollar with the Euro close to 0.8550.
CHF
The Swiss PMI manufacturing index strengthened to 71.1 for July from 66.7 previously, ending a run of generally weaker than expected data within the manufacturing sector which helped underpin confidence in the outlook, although global trends dominated.
Consumer prices declined 0.1% for July with the year-on-year rate edging higher to 0.7% from 0.6% and in line with consensus forecasts.
Swiss sight deposits declined marginally to CHF712.0bn in the latest week from CHF712.1bn the previous week which suggested that the National Bank had not been in the market to weaken the Swiss currency. There will still be speculation that the bank will look to curb the most recent franc gains. The Euro overall was able to secure only a marginal advance to 1.0750 while the dollar was held just above 0.9050 with the franc holding firm on Tuesday as the dollar remained close to 0.9050.
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