• Share this:

Top Stories

• UK PMI misses badly at 54.3 vs. 57.1 eyed
• Chinese PMI picks up pace for first time in 3 months 51.7 vs. 51.2 last
• Nikkei up 1.17% Europe flat
• Oil quiet at $74/bbl
• Gold within striking distance of $1250/oz. at $1248/oz. last

Overnight Eco

• AUD AIG Manufacturing Index 51.7 vs. 54.4
• AUD GDP q/q 1.2% vs. 0.9%
• NZD ANZ Commodity Prices m/m -1.4% vs.-0.8%
• CHF SVME PMI 61.4 vs. 65.9
• EUR German Retail Sales m/m -0.3% vs. 0.6%
• EUR Final Manufacturing PMI 55.1 vs. 55.0
• GBP Manufacturing PMI 54.3 vs. 57.1

Event Risk on Tap

• USD Challenger Job Cuts y/y
• USD ADP Non-Farm Employment Change expected at
• USD ISM Manufacturing PMI expected at
• USD Construction Spending m/m expected at
• USD ISM Manufacturing Prices expected at
• USD Total Vehicle Sales expected at

Price Action

• USD/JPY rally to 84.50 fizzles and its back below 84.00
• AUD/USD rally takes to .9000 after better GDP data and positive Chinese PMI
• GBP/USD miss on PMI takes it below 1.5350
• EUR/USD shrugs off weak Retail Sales as it trades above 1.2750

The pound dropped like a stone in early morning London trade after UK PMI Manufacturing data missed badly printing at 54.3 versus 57.1 eyed. Other high beta currencies did considerably better as strong Australian GDP numbers, the first expansion of Chinese Manufacturing PMI in four months and an upward revision to EZ PMI data boosted risk appetite at the start of European session.

The UK data took the market completely by surprise and cable tumbled more than 50 points off its highs in post news trade. Adding insult to injury UK PMI Manufacturing data for June was revised downward to 56.9 suggesting that the  recovery in manufacturing may have peaked in May and is now slowing markedly as we move into the fall.

Although manufacturing comprises a small part of the UK economy, the sharp decline in today’s data may be signaling a broader slowdown in overall growth just as the new government is about to embark on a series of fiscal austerity measures that could depress demand even more. We have  been a long time skeptic of the UK rebound story and today’s weak manufacturing results confirm our suspicions that the recovery may be running out of gas. Friday’s UK PMI Services report now becomes critical to the fate of the pound. Services comprise the vast majority of UK economic activity and if that gauge also misses its mark, cable shorts could push the unit lower to a test of the 1.5000 level over the next few trading sessions.

The euro meanwhile ignored disappointing German Retail Sales rising above 1.2750 in mid morning European trade as it was powered by positive data out Asia, an upward revision of EZ Manufacturing PMI and bullish comments from German fiscal officials who suggested that it may be time to begin removing some easing measures as the recovery builds strength. German Retail Sales missed printing at -0.3% versus 0.6% reflecting persistent caution on the part of the consumer, but markets were more impressed with the rebound in Chinese PMI which increased for the first time in four months assuring traders  that industrial sector demand from Asia remains positive.

Today’s data from Asia and Europe provides fresh evidence of a global decoupling as the finance driven economies of US and UK continue to lag far behind  the more production based nations of the industrialized world. If this trend continues into the end of the year, the dollar may lose its attraction as safe haven instrument declining against the currencies of better performing economies of Europe and Asia even if equity markets fall further.

In North America today attention turns to the ADP data at 12:15 GMT and the ISM Manufacturing report at 14:00 GMT. Market expectations for both releases are decidedly lower than the month prior and chances are good that both reports will print weak given the poor data from leading indicators. If the US data continues to disappoint, the EUR/USD could make a run to 1.2800 by the end of the day despite any risk aversion flows in the equity markets as the theme of relative outperformance begins to take hold in currencies. 

FX Upcoming

Currency	GMT	EST	Release	Expected	Prior
USD	11:30	7:30	Challenger Job Cuts y/y		-57.2%
USD	12:15	8:15	ADP Non-Farm Employment Change	22K	42K
USD	14:00	10:00	ISM Manufacturing PMI	53.6	55.5
USD	14:00	10:00	Construction Spending m/m	-0.3%	0.1%
USD	14:00	10:00	ISM Manufacturing Prices	56.3	57.5
USD			Total Vehicle Sales	11.6M	11.5M

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.