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While equity markets favoured risk, FX markets were more circumspect. European bourses posted solid gains, with many, apart from Switzerland, up 2.0% (or more amongst the EU periphery). US markets were up, but by less than 1.0%. In FX, CHF stormed ahead by 2.0%, while SEK, JPY and NOK led the pack far in arrears. GBP and EUR lagged, while USD bounced around, before a late rally. The Chicago PMI index at 56.5 (cons: 53.3, prior 58.8) eased some of the fears heading into the ISM MFG report overnight, but it was still below May’s 56.6 and was the lowest reading since November ’09. Hence, there was some relief that the number was NOT a disaster, but only slightly. Today will see the release of a large group of factory sector PMI numbers including the US, UK and China amongst others.
USD: Looking through day-to-day noise, note that the DXY index has basically ‘stalled’ around 74, where it’s largely been since early May. That occurred even though FX vols spiked in early August and have since been in retreat, although they remain toward the upper end of the May until early August range. The trend line off the early May low continues to support USD, which can’t seem to generate any sustained upward momentum. Watch ISM MFG today (cons: 48.5). An on consensus result would be the lowest reading since June ’09. Of 80 Bloomberg projections, only 3 are above 50 (8 are 50.0).
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