The US dollar is trading with a small upside bias in narrow trading ranges. The main news has consisted of PMI reports, while investors continue to digest last week’s developments. In particular the BOJ’s underwhelming response to poor economic data and a missed opportunity to reinforce the fiscal stimulus, and the dismal US GDP. Â
China’s PMI readings were mixed. The official manufacturing reading slipped to 49.9 from 50, while the Caixin version rose to 50.6 from 48.6 ( a first reading above the 50 boom/bust in 17 months). The official reading, with a focus on large businesses, saw output and new orders slow, while new export orders fell. Caixin showed an increase in output and new orders, while the slump in new export orders slowed. Â
The yuan appreciated against the US dollar for the fifth session, the longest run of the year. The yuan was fixed higher by the most in five weeks. Some are linking the yuan’s stability to several upcoming events, including the World Bank may issue SDR bonds in the coming weeks, the G20 meeting early next month, and the formal inclusion of the yuan in the SDR in a couple of months. On the other hand, today’s gains lack behind the basket that the PBOC ostensibly is tracking.The World Bank SDR bonds is reportedly a small issue (500 mln SDRs) to be issued in China’s interbank market. Â
The eurozone manufacturing PMI came stood at 52 in July. This is a touch better than the flash reading (51.9) but slower than the 52.8 in June. The improvement seemed to stem from Germany, where the final reading was 53.8 rather than the 53.7 flash and the 54.5 in June, which was a two-year high. France was unchanged from the flash reading for 48.6, compared with 48.3 in June.It is the fifth month below 50.Spain and Italy softened more than expected.Â
Italy’s manufacturing PMI eased to 51.2 from 53.5. It is the lowest reading since January 2015. The high for the year was set in April at 53.9. Spain’s manufacturing PMI fell to 51.0 from 52.2. It is the lowest since December 2013. Â
