US Open Note – Stocks return to Asia opening levels and dollar a tad lower



Market sentiment on back foot ahead of US ISM Manufacturing PMI

US major indices have given up their Asian price improvements, as sentiment deteriorates on US infrastructure talks and in advance of the US ISM Manufacturing PMI, scheduled for 14:00 GMT today.

Friday’s US mixed data may have also played a part, which reflected that consumer sentiment in July declined further from the levels in June with inflation expectations also slowing. Employment pay for Q2 was lower and the Core PCE price index m/m showed June’s prices also fell behind. The market seems to have remained glued to the dovish premise from Chairman Powell’s press conference around interest rates rather than shifting towards the mentioning of tapering. Investors are expecting a rise in volatility in the forex arena linked to a reaction in the now modestly weakened dollar, around the release of today’s US important data.

Japan’s PMI figures and consumer confidence grew stronger in July, rising to 53.0 and 37.5 against their respective estimations of 52.4 and 37.0, signalling a pickup in the recovery. The USD/JPY pair has slipped below the 109.50 level, as the upbeat yen has muted the dollar’s strength today ahead of the ISM PMI data.

Other big market players

The euro’s buoyancy has fallen short of the $1.1900 level and the pound is largely unchanged just beneath the $1.3900 mark, as the king dollar retains a lethargic demeanour ahead of the US ISM Manufacturing PMI.

The pound’s resilience could be linked to a fall in new infections from the Delta variant and a softened legal stance from the EU towards the Northern Ireland border.

Across the channel, the euro received a booster jab from strong Manufacturing PMI in Spain, Italy, France and even more so from continued positive momentum in Germany. Although there were slight misses in the former three mentioned locations, the figures for July remained elevated near June’s levels with the Eurozone final PMI beating the forecast of 62.6, coming in at 62.8. The results show a continued expansion in July even though slowed production still lingers due to supply-side delays.

RBA decision tomorrow; China’s pace slows

China’s PMI figures signalled that the recovery remained in an expansionary phase but adopted a slightly slower pace, something confirmed by China’s weaker Caixin Manufacturing PMI today at 50.3 versus the forecast of 51.1.

Mixed Australian data today signalled a sluggish Australian manufacturing industry, although the economy remains in a robust expansionary vibe. In spite of renewed lockdowns the country’s MI inflation gauge for July was 0.1% higher m/m. Nonetheless, China’s weaker Caixin manufacturing PMI has not aided the AUD/USD pair and the expected upbeat US ISM Manufacturing PMI for July may further weigh on the pair. Tomorrow, the Australian monthly building approvals as well as the tone of the Reserve Bank of Australia on interest rates and tapering may play a different tune for the aussie. The AUD/USD pair is currently trading around 0.7360.

WTI oil futures are marginally beneath the $73.00 per barrel mark and gold is testing the $1,806/oz barrier.

At 14:00 GMT, the US ISM Manufacturing PMI - together with its subcomponents - and Construction Spending are due.

Then, later at 23:30 GMT Japan’s CPI is scheduled, while at 01:30 GMT, Australian monthly building approvals are expected. The RBA will announce its rate decision and issue its statement around 04:30 GMT.

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