PM Johnson vows to carry on.

The US ISM non-manufacturing index retreated to 55.3 for June from 55.9 previously, although this was above market expectations of 54.3. There was also a slowdown in new orders growth, but business activity expanded at a slightly faster pace.

There was a net decline in employment for the month while order backlogs increased. The prices index eased only slightly with companies continuing to report sharp upward pressure on costs.

According to minutes from the June Federal Reserve policy meeting, many participants saw a significant risk of entrenched inflation which would risk an increase in inflation expectations and the rate is expected to remain above 2% for some time.

As far as the July decision is concerned, officials expected a 50 or 75 basis-point rate hike. The committee noted that a restrictive policy was needed and that there was the possibility of an even more restrictive stance if inflation pressures persisted.

After initial gains on Wednesday, US Treasuries lost ground with sustained selling during the day amid underlying inflation concerns.

The 10-year yield moved above the 2.90% level which provided net dollar support.

The UK PMI construction index declined to a 9-month low of 52.6 for June from 56.4 previously and below consensus forecasts of 55.0. The residential sector dipped into contraction territory and overall business optimism declined to 23-month lows while cost pressures remained strong, although supply constraints eased slightly.

The Euro posted fresh 19-year lows against the dollar on Wednesday and Sterling registered a 2-year low.

Both currencies secured a limited corrective recovery later in the day and held a marginal advance on Thursday as risk appetite attempted to stabilise.

Bank of England chief economist Pill stated that further monetary tightening was likely and he would be willing to step-up the pace of tightening if the data supported such moves.

He did, however, warn that there would be basically no growth in the economy over the next year and also warned against big rate hikes, especially as this could destabilise financial markets.

Prime Minister Johnson suffered a wave of resignations from Junior Ministers and there were strong calls for him to resign, but he continued to insist that he would remain in office.  The market impact was limited despite further uncertainty over fiscal policy.

Overall confidence in the Euro-Zone economy remained vulnerable amid further concerns over gas prices with particular reservations over the German outlook. There were further doubts whether the ECB would be able to push ahead with significant rate hikes.

The US data releases provided an element of relief surrounding the economy, although uncertainty remained high. EUR/USD dipped to fresh 19-year lows near 1.0160 before a marginal corrective recovery to just above 1.0200.

Higher US yields supported USD/JPY, but with resistance in the 136.0 area and consolidation around 135.70.

The Swiss franc maintained a strong tone with EUR/CHF sliding to fresh 7-year lows at 0.9875 and USD/CHF around 0.9685.

Overall, Sterling sentiment remained firmly negative, especially with on-going political chaos. GBP/USD secured a slight recovery from fresh 2-year lows around 1.1880. GBP/EUR settled around 1.1695 from 3-week highs around 1.1720.

Commodity currencies struggled to sustain a limited corrective rebound amid unease over the global economy. USD/CAD again peaked close to 1.3080 before a retreat close to 1.3000. Australian registered a record trade surplus of A$16.0bn for May which provided some Australian currency support.  AUD/USD secured a net recovery to 0.6820 on Thursday.

Economic Calendar

Expected Previous
07:00 German Factory Orders (M/M)(MAY) -2.70%
08:30 EUR Markit Germany Construction PMI (JUN) 45.4
09:30 GBP PMI Construction(JUN) 56.4
10:00 Euro - Zone Retail Sales (Y/Y)(JUN) 3.90%
10:00 Euro - Zone Retail Sales (M/M)(JUN) -1.30%
14:45 USD Markit PMI Composite(JUN 08) 51.2
14:45 USD Markit Services PMI(JUL) 51.6
15:00 USD ISM Non-Manufacturing PMI(JUN) 56.4 55.9
15:00 USD JOLTs Job Openings(MAY) 11.400M

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.