EU preparing concessions?
The final UK PMI manufacturing reading was revised down slightly to 53.3 from 53.6 in the flash reading. Although the data still suggests expansion, concerns will be around whether the UK recovery is losing momentum relative to the Euro-zone, even more so as Euro-zone data was revised higher.
Sterling dipped to lows just above 1.3000 against the Dollar before regaining some ground to trade around 1.3070 as the US currency failed to hold its best levels.
Early in US trading there were reports that the EU was prepared to offer concessions on the level-playing-field demands which are a key element in the UK/EU trade talks. The comments indicated the potential for independent dispute settling mechanisms. Markets will await the UK response and any positive signals would underpin Sterling sentiment.
The final US PMI manufacturing reading was revised down slightly to 50.9 from the flash reading of 51.3 with little impact.
The ISM manufacturing index strengthened to 54.2 for July from 52.6 the previous month which was above market expectations and the strongest reading since March 2019. There was a stronger rebound in new orders and a small increase in order backlogs, although there was still only a marginal increase in export orders. Employment continued to decline at a significant pace during the month which will maintain unease over labour-market trends. There was also still an important element of fragility within the manufacturing sector and markets were also waiting for the key jobs data later this week.
Richmond Federal Reserve (Fed) President Barkin stated that the virus resurgence is dampening the pace of US economic momentum and the next 2-3 weeks will be important in providing further information. Chicago Fed President Evans was forceful in his call for further fiscal support, especially as there was little more than monetary policy can do in the short term. The dollar was unable to sustain the gains with the Euro around 1.1750 at the European close. The US currency edged lower on Tuesday as underlying US confidence remained weak with the Euro around 1.1770 as commodity currencies were also able to stabilise amid gains inequities.
The final Euro-zone final PMI manufacturing index for July was revised higher to 51.8 from the flash reading of 51.1 with indices for all major countries in expansion territory and beating consensus forecasts on the month.
The Euro briefly strengthened ahead of the US open before losing ground amid an on-going correction with the common currency still seen as overbought. The Dollar also secured a tentative recovery with the Euro retreating to just below the 1.1700.
As of writing, the Euro is trading around the 1.1770 level against its US counterpart.