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Dollar dips after headline ISM declines – however detail of report promising

USD

The dollar was marginally higher against a basket of currencies at the time of writing on Monday.

Data was mostly mixed, after gains from a rise in Personal Consumption and Income earlier in the day where almost completely wiped by a lower-than-expected ISM Manufacturing later on.

Personal Income in June came out at 0.4% – beating expectations of 0.3%, and maintaining the same momentum as the previous result.

Personal Spending weighed, however, after slowing to only 0.2% from the previous month’s 0.7%. Real Personal Spending fell to 0.0% as expected.

Personal Consumption Expenditure, which is closely followed by the Fed who use it as a decision-making aid and proxy for inflation, rose by a higher-than-expected 1.3% on a yearly basis, when 1.2% had been forecast. Month-on-month it increased by 0.1% as estimated.

The dollar weakened after Manufacturing PMI slowed-down to 52.7 in July, from 53.5 previously and undershot the no-change expected. However, looking past the disappointing headline figure several important sub-component’s continued to show growth, including New Orders, which increased by 0.5 and is considered a fairly reliable indicator of future growth, and Production which increased by 2.0.

In addition, those components such as Inventories, Customers’ Inventories and Backlog of Orders, which can paradoxically be be omen’s of decline when they rise, actually fell the most, decreasing -3.4, -4.5 and -4.5 respectively, so that actually the report was more positive that the headline figure indicated.

Quotes from respondents in the survey showed they were still quite optimistic and put the slow-down to a mixture of seasonality (summer) and a fall in raw materials and oil-based products, due to the continued sell-off in commodities.

EUR

The euro weakened on Tuesday after the opening of the Greek Stock Market fuelled concerns about the financial stability of country, following the 23% drop in the opening minutes, with newly reopened Greek banks taking the biggest hammering.

The stock exchange had been closed since the government imposed capital controls several weeks ago as it was negotiating a bailout deal with international creditors.

Weakness was stemmed to a certain degree, however, as a result of a data which showed a higher-than-expected increase in Manufacturing PMI in the euro-zone, which rose by 52.4 in July, from 52.2 previously when it had been forecast to remain unchanged.

GBP

The pound fell on Tuesday despite an expectation-beating rise in Manufacturing PMI to 51.9 from 51.4 previously, and 51.5 forecast. The increase exceeded expectations, continuing the strong trend in U.K data, which has pushed up BOE rate hike expectations, especially following the recent release of robust Q2 GDP data.

A separate survey from the Chartered Institute of Accountants of England and Wales (ICAEW) showed an increase in confidence in May due to the general election result which gave members increased confidence about the outlook for the next few years, after the ruling conservatives gained an outright victory with a prudent deficit cutting manifesto.

This week will be important for the pound as Thursday sees the release of the BOE’s quarterly inflation report along with the BOE policy decision. It is possible that the pound’s lacklustre performance on Monday could have been as a result of many traders standing aside until the big releases on Thursday.

JPY

Early Monday morning, data released showed that Japan’s final estimate of the manufacturing PMI rose to a five month high of 51.2 in July, falling short of its preliminary reading of 51.4, comparing favourably with the prior month’s reading of 50.1.

Housing starts in Japan rose more than expected, up by 16.3% on an annual basis in June, after it registered an increase of 5.8% in the previous month.

Later in the week we have the BOJ monetary policy decision accompanied by a speech of the Governor Haruhiko Kuroda.

The content of the speech will be interesting as many analysts are beginning to think that QE is a failed experiment. The reality is, the huge stimulus package has proved futile in stimulating inflation. Japanese consumer prices have remained stubbornly subdued with consumer prices excluding food, rising just 0.1% over the past year. In fact many economists are predicting a significant contraction throughout the current quarter.

At the end of the London session the yen was trading at 123.92 per dollar.

USD

The dollar was marginally higher against a basket of currencies at the time of writing on Monday.

Data was mostly mixed, after gains from a rise in Personal Consumption and Income earlier in the day where almost completely wiped by a lower-than-expected ISM Manufacturing later on.

Personal Income in June came out at 0.4% – beating expectations of 0.3%, and maintaining the same momentum as the previous result.

Personal Spending weighed, however, after slowing to only 0.2% from the previous month’s 0.7%. Real Personal Spending fell to 0.0% as expected.

Personal Consumption Expenditure, which is closely followed by the Fed who use it as a decision-making aid and proxy for inflation, rose by a higher-than-expected 1.3% on a yearly basis, when 1.2% had been forecast. Month-on-month it increased by 0.1% as estimated.

The dollar weakened after Manufacturing PMI slowed-down to 52.7 in July, from 53.5 previously and undershot the no-change expected. However, looking past the disappointing headline figure several important sub-component’s continued to show growth, including New Orders, which increased by 0.5 and is considered a fairly reliable indicator of future growth, and Production which increased by 2.0.

In addition, those components such as Inventories, Customers’ Inventories and Backlog of Orders, which can paradoxically be be omen’s of decline when they rise, actually fell the most, decreasing -3.4, -4.5 and -4.5 respectively, so that actually the report was more positive that the headline figure indicated.

Quotes from respondents in the survey showed they were still quite optimistic and put the slow-down to a mixture of seasonality (summer) and a fall in raw materials and oil-based products, due to the continued sell-off in commodities.

EUR

The euro weakened on Tuesday after the opening of the Greek Stock Market fuelled concerns about the financial stability of country, following the 23% drop in the opening minutes, with newly reopened Greek banks taking the biggest hammering.

The stock exchange had been closed since the government imposed capital controls several weeks ago as it was negotiating a bailout deal with international creditors.

Weakness was stemmed to a certain degree, however, as a result of a data which showed a higher-than-expected increase in Manufacturing PMI in the euro-zone, which rose by 52.4 in July, from 52.2 previously when it had been forecast to remain unchanged.

GBP

The pound fell on Tuesday despite an expectation-beating rise in Manufacturing PMI to 51.9 from 51.4 previously, and 51.5 forecast. The increase exceeded expectations, continuing the strong trend in U.K data, which has pushed up BOE rate hike expectations, especially following the recent release of robust Q2 GDP data.

A separate survey from the Chartered Institute of Accountants of England and Wales (ICAEW) showed an increase in confidence in May due to the general election result which gave members increased confidence about the outlook for the next few years, after the ruling conservatives gained an outright victory with a prudent deficit cutting manifesto.

This week will be important for the pound as Thursday sees the release of the BOE’s quarterly inflation report along with the BOE policy decision. It is possible that the pound’s lacklustre performance on Monday could have been as a result of many traders standing aside until the big releases on Thursday.

JPY

Early Monday morning, data released showed that Japan’s final estimate of the manufacturing PMI rose to a five month high of 51.2 in July, falling short of its preliminary reading of 51.4, comparing favourably with the prior month’s reading of 50.1.

Housing starts in Japan rose more than expected, up by 16.3% on an annual basis in June, after it registered an increase of 5.8% in the previous month.

Later in the week we have the BOJ monetary policy decision accompanied by a speech of the Governor Haruhiko Kuroda.

The content of the speech will be interesting as many analysts are beginning to think that QE is a failed experiment. The reality is, the huge stimulus package has proved futile in stimulating inflation. Japanese consumer prices have remained stubbornly subdued with consumer prices excluding food, rising just 0.1% over the past year. In fact many economists are predicting a significant contraction throughout the current quarter.

At the end of the London session the yen was trading at 123.92 per dollar.



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