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The French PMI data overall was slightly weaker than expected with the composite index just below 50.0. German data was mixed with the manufacturing sector edging higher to 49.8 from 49.3 previously, but the services index dipped to 48.2 from 49.7 and below market expectations of 49.0.

The Euro-Zone PMI manufacturing index declined marginally to a 26-month low of 49.7 from 49.8 and slightly stronger than expected with a slightly slower rate of output decline while the services-sector index dipped to a 17-month low of 50.2 from 51.2 and slightly below expectations.  New orders declined and there was a second successive sharp increase in inventories. Supply-side pressures eased on the month and there was also a slower rate of increase in both costs and prices which will ease inflation pressure. The releases provided an element of relief and the Euro stabilised given speculation that there would be an even more severe downturn.

The US PMI manufacturing index retreated to a 25-month low of 51.3 for August from 52.2 previously and slightly below expectations of 52.0. The services-sector data was a notable shock with a further slide to a 27-month low of 44.1 from 47.3 previously. This was the second successive monthly contraction and well below consensus forecasts of 49.2. New orders were weaker with cost pressures also easing on the month and prices were increased at the slowest rate for 18 months.

The dollar dipped sharply after the US data with the Euro briefly recovering to above parity from earlier 19-year lows close to 0.9900, but there was renewed selling interest above this level amid an underlying lack of Euro confidence. There was solid dollar demand and the Euro consolidated just below 0.9950 on Wednesday.




US new home sales declined to an annual rate of 511,000 for July from a revised 585,000 previously and well below consensus forecasts of 575,000.

The Richmond Fed manufacturing index declined to -8 for August from unchanged previously and below consensus forecasts with a sharp contraction in orders. There was, however, a sharper rate of price increases for the month which will maintain inflation concerns.

The Philadelphia Fed non-manufacturing index declined to -3.7 from 0.1 previously with a net easing of cost pressures.

US Treasures had declined sharply just after the New York open, but there was a sharp reversal after the PMI and housing data with the 10-year yield dipping back below the 3.00% level from highs above 3.06%.

The dollar dipped sharply after the data with lows below 136.00 against the yen before a recovery amid expectations of a hawkish Fed stance.

Minneapolis Fed President Kashkari stated that the Fed can only relax on rate hikes when there is compelling evidence that inflation is heading towards 2.0%.

The US 10-year yield moved back above the 3.00% level in Asia with the dollar advancing to near 136.70 amid wider US gains on yield grounds.




The UK PMI manufacturing index declined sharply to a 27-month low of 46.0 for August from 52.1 previously and well below expectations of 51.0. The services-sector index declined only marginally to 52.5 from 52.6 and above market expectations of 52.0, although this was still the lowest reading for 18 months. Overall business optimism remained subdued with a net easing of cost and pricing pressures for the month as the rate of price increases slowed to a seven-month low.

The CBI industrial orders index dipped to -7 for July from 8 previously and below expectations of 2. Orders overall were weak while inflation pressures remained strong.

Sterling overall was able to recover some ground later in the day with the PMI data suggesting that the UK economy was relatively resilient in global terms.

Risk appetite also attempted to recover with Sterling jumping to above 1.1850 against the dollar after the weaker than expected US data.

Overall Sterling confidence remained fragile, especially with major concerns over the impact of the surge in energy prices which will hurt households and industry. The UK currency dipped again to near 1.1800 against the dollar on Wednesday with the Euro around 0.8420 amid a cautious risk tone.




The Swiss franc lost ground on Tuesday with the Euro recovering to highs near 0.9650. The dollar also posted highs close to 0.9700 before fading sharply to 0.9625.

There was still a reluctance to sell the Swiss franc in global markets, especially with reservations over the global outlook and the Swiss currency regained ground later in the day. There were also expectations that the National Bank would increase interest rates at the September policy meeting.

The franc posted net gains on Wednesday with the Euro just above the 0.9600 level and the dollar just below 0.9650.


Technical Levels 



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