US Dollar Firms as Euro, British Pound Weaken on Disappointing PMI Data

Global financial markets were largely controlled by purchasing managers’ data from several sources on Monday. In China, the official manufacturing purchasing managers’ index (PMI) came in at 49.9 in July versus a Reuters poll that predicted a 50.0 reading, and compared to June’s 50.0 reading. The services sector showed an uptick in activity, with July PMI coming in at 53.9 versus 53.7 in June. The Caixin manufacturing PMI came in at 50.6 in July versus 48.6 in June.

In Europe, the latest PMI data showed activity fell in both regions. The U.K.’s manufacturing activity dropped to its lowest level in over three years, with the Markit/CIPS UK manufacturing purchasing managers’ index coming in at 48.2 percent in July – down from 52.4 in June. Manufacturing growth in the Euro Zone edged lower in July, coming in at 52.0.

In the U.S., the ISM manufacturing index came in at 52.6, slightly below the estimate of 53. The Markit PMI manufacturing index reading for July came in at 52.9. Construction spending for June declined 0.6 percent.

U.S. equities were mixed on Monday with traders reacting to sharply lower oil prices and the PMI data. The Dow Jones Industrial Average posted a two-sided trade, first rallying early in the session then falling 64 points later. The S&P 500 Index managed to hold on to its gains after touching an all-time high early in the session. The benchmark index was up about 0.3 percent. The NASDAQ Composite was up about 0.2 percent, but well off its highs. It was being supported by Apple and the iShares NASDAQ Biotechnology ETF.

Nearby crude oil futures pierced the $40.00 level on Monday for the first time since April. The catalyst behind the selling was a report that showed OPEC production reached record highs last month. Also contributing to the weakness was a report from Baker Hughes that showed the biggest addition of U.S. oil rigs in two years. The oil driller’s data showed that 44 rigs were added in July, the most in a month since April 2014.

A recovery by the U.S. Dollar pushed December Comex Gold prices lower on Monday. Last week, the dollar index plunged after the Fed failed to convince investors of an impending rate hike and U.S. second quarter GDP came in well under estimates. Uncertainty over the timing of the Fed’s next rate hike helped limit losses.

The EUR/USD was lower on Monday at 1.1173 as investors couldn’t follow-through to the upside after last week’s strong surge. Today’s weaker Euro Zone PMI data helped put a lid on any rally. The GBP/USD was down 0.18% as investors reacted to the weaker than expected U.K. PMI data. Selling was limited, however, as most major players remained on the sidelines ahead of Thursday’s Bank of England interest rate decision. The market expects the BoE to cut interest rates from 1.75% to 1.50% and add additional stimulus.