Euro-zone PMI revised lower
The Markit manufacturing PMI readings for June both missed economists’ projections, and this helped push EUR/USD to the lowest in 10 days in early trading in the European session. Germany’s manufacturing PMI was actually revised higher from the flash reading, from 44.3 to 45.0, bit missed analysts forecasts of a jump to 45.4. The European reading was not so buoyant, revised down to 47.6 from 47.7, and also below economists’ forecasts.
EUR/USD slumped to 1.1316, the lowest since June 21, while EUR/JPY gave back Asia’s gains to a near-six week high of 123.36 to sit currently unchanged at 123.70. EUR/USD has again breached support at the 200-day moving average of 1.1344 after spending the last five days above it, on a closing basis.
EUR/USD Daily Chart
China PMIs also disappoint
June manufacturing PMIs out of China were also disappointing. While the official reading, which was released on Sunday, was unchanged from May’s 49.4, expectations were a little bit more optimistic of a rebound. In addition, today’s release of the Caixin equivalent saw the index drop to 49.4 from 50.2, with expectations of a slide to just 50.0. The hefty miss saw the index in contraction territory for the first time since February and hitting the lowest level since January.
But trade truce trumps PMIs
However, the announcement at the weekend of a truce in the U.S.-China tariff wars, and a return to the negotiating table, helped risk appetite overcome any weakness from the PMIs.
Equity indices have outperformed currencies, with U.S. indices up between 0.76% and 1.30%, with the NAS100 index outperforming. The Japan index is now up 1.71% but China shares exploded higher after the truce announcement, rising on the day to close 3.27% higher. The index looks poised to test the April high of 14,240.
China50 Daily Chart
U.S. PMIs expected to conform to trend
The major event on the calendar for the rest of the day will likely be the release of the U.S. ISM manufacturing PMI for June. The Markit flash PMI for June disappointed with a bigger-than-expected drop to 50.1 and the ISM reading is expected to show the same trend, with the slide to 51.0 anticipated from 52.1 in May. This would echo the softer trend seen in Europe.