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The French PMI manufacturing index dipped into contraction territory for June and the services-sector reading was slightly below expectations. Both German readings were below consensus forecasts and both also registered contraction for the month. The Euro-Zone manufacturing index declined to a 25-month low of 49.6 from 52.1 previously and below forecasts of 51.0. The services-sector index dipped to a 15-month low of 50.6 from 53.0 previously and also below expectations of 52.0.  New orders declined on the month and business expectations also declined sharply to the lowest level since May 2020. There was an easing of cost pressures, especially in manufacturing and the increase in selling prices eased slightly, although increases were still very rapid in an historical context.

The data increased fears over the Euro-Zone economy with a particular focus on Germany and the 10-year yield declined to a 7-week low below 1.05%.

The German Bundesbank stated that the economy will remain weak in the third quarter and inflation is likely to spike again after September as subsidies expire. It added that the outlook for energy markets is very uncertain. The Euro dipped sharply after the data with lows close to 1.0130 against the dollar.

The dollar, however, dipped after weaker than expected US PMI data with the Euro moving back above 1.0200 at the New York close even with a retreat on Wall Street.

CFTC data recorded a further increase in short Euro positions to near 43,000 contracts from 25,000 previously limiting to some extent the scope for further Euro selling.

ECB President Lagarde stated that the bank will raise interest rates for as long as it takes, but council member Holzmann stated that the bank will take the economy into consideration and uncertainty continued with the Euro just above the 1.0200 level in early Europe as markets montred global risk trends.




US Treasury futures posted significant gains into Friday’s New York with the 10-year yield declining to 2.82% while the 2-year yield dipped to near 3.00%. Lower yields undermined the dollar with a slide to just below 137.00 against the yen with a covering of short yen positions.

The US PMI manufacturing index edged lower to a 24-month low of 52.3 for June from 52.7 previously, but slightly above consensus forecasts. The services-sector index dipped sharply to a 26-month low of 47.0 from 52.7 previously and well below consensus forecasts of 52.6. New orders growth was subdued while employment growth was weak with a mixture of demand and supply problems. Although cost pressures remained strong, there was a slower rate of increase with selling prices increasing at the slowest rate since March 2021.  Treasuries gained further support after the data with the 10-year yield at 3-month lows below 2.75%. As equities dipped sharply, the dollar posted further sharp losses with lows near 135.50 before a recovery to the 136.00 area.

Trading was subdued in Asia on Monday with markets monitoring Bank of Japan rhetoric later in the day and the dollar traded around 136.30.




The UK PMI manufacturing index edged lower to a 25-month low of 52.2 for June from 52.8 previously and was in line with consensus forecasts. The services-sector index also declined to a 17-month low of 53.3 from 54.3, but was slightly above expectations of 52.9. New orders increased slightly on the month while business optimism improved only marginally from 25-month lows recorded the previous month. There was a slight easing of upward pressure on costs and the increase in prices charged by companies also moderated as weaker demand in the economy limited scope for companies to raise prices.

The data overall provided slight relief, although there were still important reservations over the outlook. Global trends dominated later in the day with Sterling sliding to lows near 1.1920 before a recovery to 1.2000 late in the day as the dollar lost ground.

Markets will monitor economic proposals from the two Conservative Party leadership contenders with risk trends also likely to be a key element. Overall confidence in UK fundamentals remains weak and Sterling drifted lower on Monday to trade below 1.2000 with the Euro securing a net advance to 0.8520.




The Swiss franc gained fresh support on Friday following the weaker than expected Euro-Zone business confidence data with increased fears over the recession threat. There were also increased concerns over the global economy which underpinned the Swiss currency and equity markets were generally fragile. The Euro dipped to lows near 0.9810 before a limited recovery while the dollar retreated sharply to lows near 0.9600. The Euro staged a slight recovery on Monday with the dollar trading around 0.9630 and markets will be monitoring any National Bank currency comments closely

Technical Levels 




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