The Greenback Slides as Focus Shifts to EU and U.S PMIs

A narrowing in yield differentials weighs on the Greenback early on. Manufacturing PMI numbers and geopolitics will drive the majors today.
Bob Mason
Arms trade business concept.

Earlier in the Day:

The economic calendar was on the busier side this morning.

Australia, Japan, and China manufacturing figures provide direction in the early part of the day. Of less influence were Japan’s 1st quarter capital spending and Australia’s company gross operating profit figures.

For the Aussie Dollar,

The AIG Manufacturing PMI fell from 54.8 to 52.7 in May.  According to the latest AIG PMI Report,

  • The production sub-index slid by 6.9 points to 51.2, with the new orders sub-index falling by 3.3 points to 52.3.
  • Exports and sales were also in decline, with the exports sub-index falling by 3.6 points to 50.3.
  • Both the average wage index and the selling prices index eased, whilst holding above 50.0.
  • 3 of the 6 sectors expanded in May, with the food & beverage sector seeing its fastest rate of expansion on record.

The Aussie Dollar moved from 0.69309 to $0.69319 upon release of the figures at the start of the session.

Company gross operating profits rose by 1.7% in the 1st quarter, falling short of a forecasted 3% increase. Profits had increased by 0.8% in the 4th quarter. According to figures released by the ABS,

  • Year-on-year, gross operating profits increased by 7.8%.

The Aussie Dollar moved from $0.69409 to $0.69434 upon release of the figures that preceded China’s manufacturing numbers.

For the Japanese Yen,

Capital spending rose by 6.1%, year-on-year, in the 1st quarter. While up from a 4th quarter 5.7% rise, spending fell short of a forecasted 11.6% increase.

The Japanese Yen moved from ¥108.218 to ¥108.254 upon release of the figures that preceded the manufacturing PMI.

The Manufacturing PMI rose from 49.6 to 49.8 in May. According to the Markit PMI survey,

  • Output fell for a 5th month in a row, weighed by falling domestic and overseas demand.
  • New export orders fell for a 6th consecutive month.
  • Concerns over the lack of new work led to a fall in inventories and lower input purchases.
  • The rate of Job creation also eased to its lowest since November 2016.
  • Firms also turned pessimistic, with the business outlook turning pessimistic for the first time in six-and-a-half years.

The Japanese Yen moved from ¥108.236 to ¥108.283 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.17% to ¥108.11 against the U.S Dollar.

Out of China,

In May, the Caixin manufacturing PMI held steady at 50.2, which was better than a forecasted 50.0. According to the Markit Survey,

  • Total new work rose at a faster pace, with export sales seeing a marginal increase.
  • The sub-index for new orders and for new export orders moved back above 50.0 in May.
  • Stocks purchased and stocks of finished goods increased. While the sub-index for stocks purchased moved back above 50, the sub-index for finished goods remained in contraction.
  • Sentiment towards the economic outlook deteriorated. The sentiment towards future output sub-index slid to its lowest level since records began in April 2012.

The Aussie Dollar moved from $0.69434 to $0.69514 upon release of the figures. At the time of writing, the Aussie Dollar was up 0.14% to $0.6948. Positive numbers out of China and reports of Australia not being on Trump’s hit list provided early support.


At the time of writing, the Kiwi Dollar was up by 0.26% to $0.6548. Early gains came off the back of a slide in the Greenback and better than expected China PMI numbers.

The Day Ahead:

For the EUR

Spain and Italy’s May manufacturing PMI figures are due out later this morning. France, Germany and the Eurozone’s finalized manufacturing PMI’s are also due out.

The market focus will be on Italy and Germany’s PMI numbers, which are likely to be negative for the EUR. From elsewhere, China’s better than forecasted PMI provided support in the early part of the day.

A slide in U.S Treasury yields added to the EUR upside early in the day.

At the time of writing, the EUR was up 0.12% to $1.1182.

For the Pound

Following a particularly quiet week on the economic data front, May manufacturing PMI figures are due out.

We can expect the Pound to be sensitive to the numbers as the markets begin to consider the impact of political uncertainty on the UK economy.

Outside of the numbers, Brexit and chatter from the UK Parliament will continue to be a key driver. The Pound is back to the mercy of deal or no-deal chatter as the race for the next British PM heats up.

At the time of writing, the Pound was up 0.12% to $1.2644. Dovish sentiment towards U.S monetary policy overshadowed political woes domestically in the early hours.

Across the Pond

U.S manufacturing PMI figures are due out later this afternoon. Both the Markit and ISM surveys are due out, with the market focus expected to be on the ISM numbers.

Forecasts are Dollar positive for the headline number, though we can expect more influence from the employment and new orders sub-indexes.

In April, the new orders sub-index had slipped by 0.9 percentage points to 58.1%. The employment index had also fallen, sliding by 2.2 percentage points to 53.7%.

Outside of the stats, Trump and the administration will continue to influence market risk appetite through the day.

At the time of writing, the Dollar Spot Index was down 0.12% to 97.635.

For the Loonie

It’s a quiet day ahead, with no material stats due out.

The lack of stats will leave market risk sentiment in control of the Loonie through the day.

The Loonie was up by 0.12% to C$1.3500, against the U.S Dollar, at the time of writing. A slide in the greenback and positive economic data out of China provided support early on.

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