Despite retreating on downbeat US PMI in New York morning on concerns over economic growth, dollar later pared its losses and ended the day slightly higher in tandem with US yields against majority of its peers except the safe-haven jpy after hawkish comments from Fed's Powell.
Reuters reported U.S. business activity slowed considerably in June as high inflation and declining consumer confidence dampened demand across the board, resulting in a gauge of new orders contracting for the first time in nearly two years. SnP Global said on Thursday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, dropped to 51.2 this month from a final reading of 53.6 in May. That was the slowest growth pace in five months. And the Federal Reserve's commitment to reining in 40-year-high inflation is "unconditional" but also comes with the risk of higher unemployment, U.S. central bank chief Jerome Powell said on Thursday. "It's unconditional," Powell told the U.S. House of Representatives Financial Services Committee when asked about the Fed's commitment to fight inflation that, by the central bank's preferred measure, is running at more than three times its 2% target. "We really need to restore price stability ... because without that we're not going to be able to have a sustained period of maximum employment where the benefits are spread very widely," he said.
Versus the Japanese yen, dollar remained under pressure and retreated sharply to 135.14 in Asian morning. Despite rebounding to 135.87 at European open, the pair tumbled to an intra-day low on cross-buying in jpy to session lows of 134.27 in New York morning before recovering to 134.98 in tandem with US yields after Fed Powell's testimony.
The single currency traded sideways in Asia before edging up to 1.0579 at European open. The pair then met renewed selling there and tumbled to an intra-day low at 1.0484 on the release of poor EU PMIs together with cross-selling in euro especially vs sterling. The pair then staged a short-covering rebound to 1.0553 in New York morning on downbeat US PMI before retreating again.
More from Reuters, the German economy, Europe's largest, suffered a sharp loss of momentum at the end of the second quarter, with falling exports acting as a drag and economic uncertainty and inflation weighing on domestic demand, a preliminary survey showed on Thursday. SnP Global's flash Purchasing Managers' Index (PMI) for services fell to 52.4 in June from May's final reading of 55.0, but still came in above the 50 mark that denotes expansion for the sixth month in a row. Analysts had expected a dip to 54.5. The flash PMI for manufacturing dropped to 52.0 from May's final reading of 54.8, below the 54.0 forecast by analysts in a Reuters poll.
The British pound also moved sideways in Asia before tumbling in tandem with euro to an intra-day low at 1.2171 in European morning. The pair then erased its losses and rallied to an intra-day high at 1.2294 in New York morning due partly to cross-buying in sterling on upbeat UK PMI before retreating sharply to 1.2221.
Sources from Reuters reported Britain's economy is showing signs of stalling as high inflation hits new orders and businesses report levels of concern that normally signal a recession, a closely watched industry survey showed on Thursday. SnP Global's Purchasing Managers' Index (PMI), covering services and manufacturing firms, also showed companies raising pay and passing higher costs on to clients, a worry for the Bank of England. The PMI's preliminary composite index held at 53.1 in June, above the median forecast of 52.6 in a Reuters poll of economists and unchanged from May.
Data to be released on Friday:
New Zealand Market Holiday, U.K. Gfk consumer confidence, retail sales, Japan nationwide CPI, Italy business confidence, trade balance, consumer confidence, Germany Ifo business climate, Ifo current conditions, Ifo expectations, U.S. building permits, University of Michigan sentiment, new home sales on Friday and Canada average weekly earnings.
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