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The US dollar was steadier on Monday following its tumble after weaker-than-expected GDP data last Friday. US economic growth missed estimates by a wide margin in the second quarter due to weak business spending, reversing the recent trend of bullish data for the world’s largest economy. Adding to the disappointment was a downward revision to first quarter growth, leading investors to significantly pare back their expectations of a Fed rate hike in 2016.
The dollar hit a three-week low of 101.96 yen after the data but bounced back slightly in Asian trading today to around 102.50 yen. The greenback was today supported by remarks from New York Fed President William Dudley who said that it was “premature” to rule out another rate hike before the end of the year. All eyes will now be on July’s non-farm payrolls report due on Friday.
The weaker dollar and receding expectations of a US rate increase boosted commodities and Asian equities on Monday. Oil prices were slightly firmer with WTI futures trading at around $41.50 per barrel in late Asian session. But gold prices were down on profit taking following Friday’s sharp rally. The yellow metal was last trading at $1347 an ounce.
Also helping market sentiment on Monday was better than expected manufacturing PMI out of China. The Caixin manufacturing PMI for July beat estimates to rise above 50 to show the first expansion in activity since February 2015. The index increased from 48.6 to 50.6, against expectations it would rise only modestly to 48.7. However, there were conflicting views on the state of the economy as the official manufacturing PMI dipped slightly from 50.0 to 49.9 in July, indicating the recovery is not yet widespread.
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The yuan was slightly weaker on Monday despite a firmer midpoint as the Chinese currency took a breather from its recent gains against the dollar. It last stood at 6.6363 per dollar in onshore trading.
The Australian and New Zealand dollars were mostly flat on Monday after surging against their US counterpart on Friday despite growing expectations of rate cuts by both the RBA and the RBNZ. The aussie briefly rose above 0.76 versus the greenback earlier in today’s Asian session but later eased to 0.7590. The kiwi meanwhile was trading near 2½ -week highs at 0.7194.
Another currency benefiting from the dollar’s slide was the pound, which held above 1.32 dollars even as the Bank of England is poised to cut rates on Thursday when it meets for its latest policy decision.
Coming up later today, manufacturing PMI for the Eurozone, the UK and the US will dominate the day, while the ISM manufacturing out of the US will also be closely watched following last week’s poor GDP readings.
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