Dollar pared its losses on renewed risk aversion despite poor US data

Despite the initially fall across the board in New York Friday as the release of downbeat U.S. PMIs together with falling U.S. yields triggered broad-based weakness in usd, dollar later pared its losses on renewed risk aversion and ended the day marginally lower against majority of its peers.  
  
Reuters reported U.S. business activity contracted for the first time in nearly two years in July as a sharp slowdown in the service sector outweighed continued modest growth in manufacturing, painting a glum picture for an economy stunted by high inflation, rising interest rates and deteriorating consumer confidence.

S&P Global on Friday said its preliminary - or "flash" - U.S. Composite PMI Output Index had tumbled far more than expected to 47.5 this month from a final reading of 52.3 in June. With a reading below 50 indicating business activity had contracted, it is a development likely to feed into a vocal debate over whether the U.S. economy is back in - or near - a recession after rebounding sharply from the downturn in early 2020 at the start of the COVID-19 pandemic.  
  
Versus the Japanese yen, dollar found renewed buying at 137.03 in Asia and rose to session highs at 137.95 ahead of European open. The pair then erased its gains and tumbled to a 2-week low at 135.58 in New York morning on cross-buying in jpy together with release of poor U.S. PMIs before rebounding to 136.27 near the close.  
  
The single currency remained under pressure in Asia and retreated to 1.0181. Despite a brief rebound to 1.0213 in early European morning, price fell to an intra-day low at 1.0131 on release of poor EU PMIs. Euro then erased its losses and rallied to an intra-day high at 1.0255 in New York morning on usd's broad-based weakness before retreating.  
  
More from Reuters, German business activity unexpectedly shrank in July, a preliminary reading of a purchasing managers survey showed on Friday, as companies were hit by inflation pressures and supply chain disruptions.

S&P Global's flash Purchasing Managers' Index (PMI) for services fell to 49.2 in July, from June's final reading of 52.4, while its manufacturing index dropped to 49.2, from 52.0 the previous month. Analysts had forecast both services and manufacturing this month would be above the 50 mark, which signals growth in activity, at 51.2 and 50.6, respectively.  
  
The British pound retreated sharply from 1.2003 at Asian open to 1.1954 before tumbling in tandem with euro to an intra-day low at 1.1917 in early European morning. Cable then erased its losses and rallied in New York morning to a 2-1/2 week high at 1.2064 on usd's weakness before retreating to 1.1972 in New York afternoon on cross-selling in sterling.  
  
Further news from Reuters, Britain's businesses grew at their slowest pace in 17 months in July and inflation pressures eased, according to an industry survey that might reduce pressure on the Bank of England to deliver a bigger-than-usual interest rate hike next month.

The preliminary version of the S&P Global's Purchasing Managers' Index (PMI), covering services and manufacturing firms, fell to 52.8 - the lowest since February 2021 - from June's 53.7. Output among factories contracted for the first time since May 2020 but travel and leisure firms saw stronger new orders, according to the survey which was released on Friday.  
  
Data to be released this week:  
  
Germany Ifo business climate, Ifo current conditions, Ifo expectations, U.K. CBI trends orders, CBI business optimism, U.S. national activity and Dallas Fed manufacturing business index on Monday.  
  
U.K. CBI distributive trades, U.S. building permits, redbook, monthly home price, consumer confidence, new homes sales and Richmond Fed manufacturing on Tuesday,  
  
U.K. BRC shop price index, Australia CPI, Japan coincident index, leading indicator, Germany Gfk consumer sentiment, France consumer confidence, Italy business confidence, consume confidence, Swiss investor sentiment, U.S. MBA mortgage application, durable goods, durables ex-transport, durables ex-defense, goods trade balance, wholesale inventories, pending home sales and Fed interest rate decision on Wednesday.  
  
Australia retail sales, export prices, import prices, France producer prices, Italy industrial sales, trade balance, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer sentiment, Germany CPI, US GDP, PCE prices, initial jobless claims, continuing jobless claims, KC Fed manufacturing and Canada average weekly earnings on Thursday.  
  
Japan Tokyo CPI, unemployment rate, industrial output, retail sales, consumer confidence, construction orders, housing starts, Australia PPI, France consumer spending, GDP, Germany GDP, import prices, unemployment change, unemployment rate, UK nationwide house price, Swiss retail sales, KOF indicator, France CPI, Italy GDP, CPI, EU HICP, U.S. personal income, personal spending, PCE price index, employment wages, employment costs, Chicago PMI, University of Michigan sentiment, Canada GDP and budget balance on Friday.