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A Dollar Tumble should the Private Sector PMIs Disappoint

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Earlier in the Day:

Economic data released through the Asian session this morning was limited to May inflation and prelim manufacturing numbers out of Japan.

For the Japanese Yen , the annual rate of core inflation stood at 0.7% in May, which was in line with forecasts and April's rate, while consumer prices rebounded in May, month-on-month, rising by 0.1%, following April's 0.4% fall.

Rising fuel, light and water charges (+3.1%), medical care (+1.9%) and transportation and communication prices (+1.3%) were attributed to the annual rate of inflation, while a pullback in prices for furniture and household utensils (-1.5%) dragged in May.

Month-on-month, the pickup in consumer prices was attributed to a 1% rise in fuel, light and water charges.

The Japanese Yen moved from ¥109.926 to ¥109.956 upon release of the figures.

Japan's prelim manufacturing PMI rose from 52.8 to 53.1 in May, according to prelim figures, coming in ahead of a forecasted 52.6.

Of immediate concern will be a slide in new export orders and a fall in the pace of new orders, while rising employment supported the positive outlook, despite optimism softening in May.

From a policy perspective, rising input and output prices provided some optimism towards inflation, supported by the pickup in the rate of inflation in May, month-on-month, though the numbers are not compelling enough to suggest a near-term shift in outlook towards BoJ policy, the 1 st quarter contraction in the economy and pullback in new export orders amidst a rising risk of a global trade war being negatives for the BoJ.

The Japanese Yen moved from ¥109.94 to ¥109.953 against the Dollar upon release of the figures, before easing to ¥110 at the time of writing, down 0.01% for the morning.

Elsewhere, the Aussie Dollar and Kiwi Dollar were down 0.04% and by 0.06% respectively, with trade war jitters pinning back the commodity currency pair through the early part of the day.

In the equity markets, it was a mixed bag through the morning, the CSI300 recovering from early losses to a gain of 0.14% at the time of writing, while the Nikkei, Hang Seng and ASX200 were in the red, the Nikkei seeing the heaviest losses, down 0.85% through the early part of the day, the Nikkei's losses coming from an auto stock sell-off in response to Daimler's profit warning resulting from the U.S - China trade war.

The Day Ahead:

For the EUR , it's a relatively busy day on the data front, with prelim June private sector PMI numbers scheduled for release out of France, Germany and the Eurozone, along with final 1 st quarter GDP numbers out of France.

Market sentiment towards the EUR and monetary policy has been particularly negative and even more so in the wake of the ECB press conference and recent Draghi commentary.

With the Dollar having everything to lose and the EUR everything to gain, market sensitivity to the stats will be heightened near-term, especially with the risks of a global trade war lingering.

At the time of writing, the EUR was up 0.07% to $1.1612, with Germany's manufacturing PMI likely to be the key driver, forecasts a negative for the EUR, though there is always Italy to now ruffle the market's feathers.

For the Pound , there are no material stats scheduled for release through the morning, while the BoE quarterly bulletin will be in focus. Thursday's MPC vote count for a rate hike got more hawkish, with the minutes citing a likely uptick in the annual rate of inflation suggesting a possible near-term move supporting the rise in the Pound. Today's bulletin could add more fuel to the policy fire, though Brexit continues to be a major hurdle for the Sterling bulls.

At the time of writing, the Pound was up 0.17% to $1.3263, support continuing in response to Thursday's policy decision and the all-important vote count, with the Bulletin and Brexit chatter in focus through the day ahead.

Across the Pond , key stats out of the U.S are limited to prelim private sector PMI numbers. Following the Dollar slide in response to June's Philly FED Manufacturing PMI and the slide in new orders, pointing to a further slowdown going through the early part of the 3 rd quarter, any contradicting numbers could see a Dollar rebound.

Service sector PMI numbers will be key for the Dollar, though the recent trade war chatter would have increased market sensitivity to the manufacturing numbers, better than expected figures supportive of a Dollar rebound to 95 levels.

At the time of writing, the Dollar Spot Index was down 0.07% to 94.797, with the stats and Trump the key drivers through the day.

Across the border, it's a big day, with key stats through the day including May inflation and retail sales figures. While the stats will influence, the direction of crude oil prices will also need to be considered as OPEC and Russia convene to discuss output in the wake of the U.S withdrawal from the Iran nuclear agreement and falling output out of Venezuela.

It's not as clear cut however, with trade war chatter having weighed heavily on the Loonie through the week, the Loonie currently up 0.12% to C$1.3299 at the time of writing.

This article was originally posted on FX Empire

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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