Restriction easing stabilises Sterling… For now.
The preliminary manufacturing PMI for June beat consensus forecasts of 45 with a 4-month high of 50.1, just inside expansion territory and significant improvement on May’s 40.7. The services sector PMI also beat the forecasts with 47.0, up from 29.0 in May and despite a limited re-opening of the economy. Business confidence strengthened further but order flows remain weak and employment continued to decline. The Pound moved higher after the data releases but dipped lower into the New York open amid negative sentiment.
Sentiment stabilised after Boris Johnson announced easing of restrictions from July 4th, many leisure and hospitality facilities will re-open which will help boost the economy at the start of the third quarter. Firm risk appetite helped the Pound hold it’s gains once it moved above 1.2500 on the Dollar. The Euro pushed to 3-month highs near 1.1013 before falling back to 1.1075 at the market close. The Pound is little changed this morning, holding above 1.2500 on the Dollar and 1.1055 on the Euro.
The flash US manufacturing PMI index strengthened to 49.6 for June from 39.8 and above consensus forecasts of 48.0 while the services-sector index strengthened to 46.7 from 37.5. This was a 4-month high, but the only one of the main European and US releases which did not exceed market expectations by a significant margin. New home sales were above consensus forecasts at an annual rate of 676,000 from 580,000 previously with the Richmond Fed index recovering strongly to 0 from -27 previously.
The dollar overall remained weaker as defensive demand faded and commodity currencies strengthened with the Euro strengthening to one-week highs near 1.1350 before fading slightly. The US currency maintained a soft tone this morning.
There was a strong recovery in the flash June French PMI indices with the services-sector index at 50.3 from 31.1 previously while manufacturing and composite indices also recovered to above 50.0. There was a slightly less robust recovery for the German indices with manufacturing at 44.6 from 36.6 previously. The Euro-zone composite index strengthened to a 4-month high of 47.5 from 31.9 previously. The data still indicated contraction for the Euro-zone as a whole with new business and order backlogs also continuing to decline, but there was a further sharp increase in business confidence.
The Euro moved higher against the Dollar following the data on recovery hopes, although there was selling interest and strong resistance at the 1.1350. Sentiment was dampened slightly by reports that Germany would impose a local lockdown in the Gutersloh district in North-Rhine Westphalia due to the outbreak at the Tonnies meat-processing plant.
As of writing the Euro trades around 1.1315 against its US counterpart.