Better than expected US manufacturing data helped trigger a US dollar recovery.

Slightly better than expected US manufacturing data helped trigger a US dollar recovery with 10-day highs as expectations of aggressive Fed rate cuts were scaled back.

Bond yields failed to increase significantly, however, which limited Japanese yen and Swiss franc selling while record lows for German yields hurt the Euro.

Sterling was undermined by weaker than expected PMI manufacturing data. The Australian dollar was resilient despite a further Reserve Bank of Australia interest rate cut to record lows

Oil prices corrected lower with the OPEC decision to price-in an extension of production cuts priced in, but sentiment held firm. Gold continued to correct lower as defensive demand remained weaker but regained some ground on Tuesday.

Bitcoin dipped below the $10,000 level as defensive support faltered.

The UK PMI manufacturing index declined to 48.0 for June from 49.4 the previous month which was below consensus expectations of 49.2 and the lowest reading for over six years. New orders growth contracted further with a further decline in foreign orders while employment declined for the third successive month. There was a further unwinding of inventories built up ahead of the panned March EU exit and business confidence remained weak. Net lending was also weaker than expected with the data overall reinforcing concerns over the near-term economic outlook and Sterling moved lower following the data.

Underlying political concerns also undermined support with a retreat to below 1.2650 against the dollar, although there was a significant recovery against the Euro as the single currency rallied towards 1.1200. There was little change on Tuesday with dovish monetary stances elsewhere providing some Sterling protection.

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