US PMI data disappoint markets

USD

Yesterday’s PMI releases were surprisingly positive for the UK whilst the euro and US data missed. The S&P Global US Manufacturing PMI read at 52.4 for June which represents a significant slowdown on May’s 57 and is far below forecasts of 56. Whilst US service PMI showed a reading of 51.6 for this month, down from 53.4. The data suggests a material economic slowdown occurring in the US economy.

Business confidence was also reported to have dropped to its lowest level since 2020. The dollar fell as a result of the poor data and there are now clear signs that the US economy may not be able to avoid a recession if the Federal Reserve continues with its aggressive rate hiking cycle to combat inflation.

Dollar trading has been choppy this week, with markets now betting on more cautious policy action from the Fed with another expected 75 basis points rate increase in July. The dollar index has dropped 0.42% over the period. Governor Michelle Bowman said on Thursday that she supports a 50 bps hike for the next few meetings, whilst Fed Chair Jerome Powell confirmed the central bank’s commitment to taming inflation even if it risks future economic growth.

USD dropped by around 0.15% against GBP and has lost around 0.48% for the week.

Key announcements

6:00 – GBP – UK Retail Sales – Actual -0.5% Forecast -0.6%
12:30 – USD – US FOMC Member Bullard Speaks
14.00 – USD – US Revised Consumer Sentiment