Euro recovers from 19-year lows.
The Euro-Zone PMI manufacturing index declined marginally to a 26-month low of 49.7 from 49.8 and slightly stronger than expected with a slightly slower rate of output decline while the services-sector index dipped to a 17-month low of 50.2 from 51.2 and slightly below expectations.
New orders declined and there was a second successive sharp increase in inventories. Supply-side pressures eased on the month and there was also a slower rate of increase in both costs and prices.
The US PMI manufacturing index retreated to a 25-month low of 51.3 for August from 52.2 previously and slightly below expectations of 52.0. The services-sector data was a notable shock with a further slide to a 27-month low of 44.1 from 47.3 previously. This was the second successive monthly contraction and well below consensus forecasts of 49.2.
New orders were weaker with cost pressures also easing on the month and prices were increased at the slowest rate for 18 months.
The UK PMI manufacturing index declined sharply to a 27-month low of 46.0 for August from 52.1 previously and well below expectations of 51.0. The services-sector index declined only marginally to 52.5 from 52.6 and above market expectations of 52.0, although this was still the lowest reading for 18 months.
Overall business optimism remained subdued with a net easing of cost and pricing pressures for the month with the rate of price increases at a seven-month low.
The Euro posted fresh 19-month lows near 0.9900 on Tuesday before stabilising after the Euro-Zone data and then recovering sharply after the weaker than expected US data.
EUR/USD was unable to hold above the parity level amid underlying selling pressure.
Minneapolis Fed President Kashkari stated that the Fed can only relax on rate hikes when there is compelling evidence that inflation is heading towards 2.0%.
US 10-year yields dipped sharply after the weaker than expected US services PMI data, but there was selling of Treasuries on rallies with the 10-year yield back above 3.00% on Wednesday.
The latest Euro-Zone PMI data provided an element of relief given fears over a sharper deterioration. Euro-Zone August consumer confidence recovered to -24.9 from -27.0 previously. The Euro gained brief support after reports that the Nord-Stream pipeline shutdown would not go ahead with gas prices moving lower.
US Treasuries reversed losses after the much weaker than expected US services data. New home sales were also much weaker than expected. The Richmond Fed manufacturing index and Philly Fed non-manufacturing survey both dipped into negative territory.
EUR/USD briefly recovered above 1.0000 after the US data. There was dollar buying on dips with EURUSD just below 0.9950 on Wednesday.
Lower yields triggered a sharp dip in USD/JPY to below 136.00. USD/JPY traded back to above 136.50 on Wednesday as US yields increased again.
The Swiss franc lost ground on Tuesday, but quickly pared intra-day losses. EUR/CHF traded just above 0.9600 on Wednesday with USD/CHF just below 0.9650.
Sterling managed to regain some territory after mixed data and risk conditions were also marginally more positive. GBP/USD recovered from 2-year lows at 1.1720 to above 1.1850 before fading to near 1.1800 on Wednesday.
Commodity currencies rallied after the weaker than expected US data and dollar retreat. AUD/USD recovered to near 0.6950 before drifting back to near 0.6900. The USD/CAD dip to below 1.3000 triggered further selling as oil prices posted gains and settled around 1.2975.
|13:30||USD Durable Goods Orders Ex Transportation(JUL)||0.40%|
|13:30||USD Durable Goods Orders (M/M)(JUL)||1.90%|
|15:00||USD Pending Home Sales (M/M)(JUL)||-8.60%|
|23:45||NZD Retail Sales (Q/Q)||-0.50%|