Manufacturing PMIs Put the EUR and USD in Focus as Demand for Riskier Assets Rises

Bob Mason

Sun, May 31, 2020, 9:21 PM 5 min read

Earlier in the Day:

It was a relatively busy day on the economic calendar this morning. The Aussie Dollar and China were in focus early in the day.

From the weekend, private sector PMI numbers from China had delivered mixed results. The NBS manufacturing PMI slipped from 50.8 to 50.6, while the Services PMI rose from 53.2 to 53.6. As a result of the mixed results, the Composite PMI held steady at 53.4.

Away from the economic calendar, there was plenty for the markets to consider from late on Friday and the weekend.

Also for the markets to consider were the riots across the U.S and what’s to come from political activists in HK as the U.S turns its back.

It wasn’t too long ago that Capitol Hill had approved a Bill to protect the rights of HK citizens. Some U.S confetti rather than anything meaningful judging by the latest move by the government.

The fact that Trump retained the phase 1 trade agreement muted the effect of other steps the U.S government plans to take.

Looking at the latest coronavirus numbers,

On Sunday, the number of new coronavirus cases rose by 112,809 to 6,263,071. On Saturday, the number of new cases had risen by 124,155. The daily increase was lower than Saturday’s rise while up from 101,608 new cases from the previous Sunday.

France, Germany, Italy, and Spain reported just 991 new cases on Sunday, which was down from 3,045 new cases on Saturday. On the previous Sunday, 1,470 new cases had been reported.

From the U.S, the total number of cases rose by 20,569 to 1,837,170 on Sunday. On Saturday, the total number of cases had risen by 23,338. On Sunday 24^th May, a total of 20.190 new cases had been reported.

For the Aussie Dollar

The AIG Manufacturing Index rose from 35.8 to 41.6. In April, the Index had tumbled from 53.7 to 35.8.

The Aussie Dollar moved from $0.66592 to $0.66598 upon release of the figures, which preceded China’s Caixin manufacturing PMI.

For the Japanese Yen

Capital spending rose by 4.3% in the 1^st quarter, year-on-year, reversing a 3.5% fall in the 4^th quarter.

The Japanese Yen moved from ¥107.667 to ¥107.720 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.13% to ¥107.69 against the U.S Dollar.

Out of China

The CAIXIN Manufacturing PMI rose from 49.4 to 50.7 in May. Economists had forecast a rise to 49.6.

According to the May Caixin Survey,

Output increased at the fastest pace since January 2011.
Weak demand remained an issue, however, with export orders seeing a marked decline.
Companies reduced staffing levels and only marginally increased buying activity as a result.
Backlogs of orders fell for the 1^st time since February 2016.

The Aussie Dollar moved from $0.67256 to $0.67253 upon release of the figures. At the time of writing, the Aussie Dollar up by 1.00% at $0.6734.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.66% to $0.6246.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include May’s Manufacturing PMI numbers for Italy and Spain. Finalized PMIs are also due out for France, Germany, and Spain.

The markets will be looking for better a rise in Italy’s PMI and for Germany and the Eurozone PMIs to avoid a downward revision.

We expect that the focus will be in the details, with hiring and new orders key areas to consider.

Away from the economic calendar, risk appetite supported the EUR in the early part of the day.

At the time of writing, the EUR was up by 0.33% to $1.1138.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. May’s finalized Manufacturing PMI is due out later today. Barring a material deviation from prelim, however, we would expect the Pound to brush aside the numbers.

Updates on Brexit and COVID-19 will likely be the key drivers on the day.

At the time of writing, the Pound was up by 0.47% to $1.2401, the upside coming off the back of Dollar weakness.

Across the Pond

It’s a busy day ahead on the U.S economic calendar. The market’s preferred ISM Manufacturing PMI for May is due out along with finalized Markit Manufacturing PMI numbers.

Expect the focus to be on the ISM number. Last week, we saw the Chicago PMI fall back. A similar trend in the ISM would raise doubts over a summer economic recovery in the sector.

Outside of the numbers, however, the markets brushed aside concerns over rioting and the rise in tensions between the U.S and China. Chatter from Beijing or Washington could shift the optimism, however.

The Dollar Spot Index was down by 0.38% to 97.97 at the time of writing.

For the Loonie

It’s a particularly quiet day ahead on the economic calendar. There are no material stats to provide the Loonie with direction.

The lack of stats leaves the Loonie in the hands of the news wires and market risk sentiment on the day.

At the time of writing, the Loonie was up by 0.55% to C$1.3704 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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