News & Analysis


Whilst Americans might be taking the day off to celebrate independence day today, Monday saw Canada day being celebrated north of the border. As such, with Canadian workers benefitting from a long weekend there was little domestic news to drive the loonie over the course of yesterday’s session. Today does have a couple of things to keep an eye on, with manufacturing PMIs of particular note. However, it seems likely that traders will have to wait until US colleagues are back in the office on Wednesday for any meaningful price action in USDCAD.


Yesterday brought some interesting tidbits on the state of the US economy, specifically in the form of ISM manufacturing PMIs. Printing at a below expectations 46.0 on the headline number, yesterday’s release showed that activity in the US manufacturing sector hit the lowest level since May 2020. Notably, the prices paid index also fell to 41.8, suggesting that inflationary pressures are continuing to ease. This is in sharp contrast to a series of recent US data releases that indicated an economy holding up well under pressure from rising interest rates and building a narrative of US outperformance. But it does add to a wider body of evidence that is providing mixed signals about the state of the US economy. This contrast was most notable in the divergence between the household and establishment survey in the latest set of publications. In this vein markets will get another update come Friday in the week’s big event with the publication of nonfarm payrolls data. With consensus estimates expecting a print of 225k, this remains above the level that we see as consistent with 2% inflation on a sustainable basis. But it will further muddy the waters when it comes to exactly what is going on with US inflationary dynamics. Given the mixed messages in the data, it is perhaps understandable that the reaction of the DXY dollar index was muted over the course of yesterday’s session, having climbed early in the morning, most of the gains were returned by the end of the session to finish the day up marginally. Today though, with US markets closed for independence day, the session looks set to be a relatively quiet one, with moves likely to be driven by action of the other side of dollar pairs.


The single currency also posted a broadly flat session yesterday in response to the lack of events on the calendar at the start of the week. While EURUSD evidenced some back and forth throughout the day, the only releases of note were a final Eurozone June manufacturing PMI reading and a June US manufacturing ISM reading (see USD) that printed lower than expected, not something to cause large waves of volatility in isolation. Nor were comments from central bank speakers any more insightful. Whilst the ECB’s Nagel did discuss the central bank’s likely policy path, the commentary contained nothing new for markets already expecting the hawkish tone of the remarks.  Today’s trading day does not look likely to be any more exciting. With US markets closed for the 4th of July holiday, liquidity in the pair today will be limited, with further speeches by Nagel and Stournaras the only events to keep an eye on. Coupled with the absence of major catalysts in the markets, will likely result in a quiet session that will keep the EURUSD trading in its recent range.


Monday delivered something of a slow start to the week for sterling with the pound finishing the day broadly flat against both the dollar and the euro. Perhaps not surprising given the complete lack of market moving data out of the UK either yesterday or today, and no central bank speakers either. Indeed, the closest thing to market relevant news is yet another headline that the government would like to see more of the benefits from higher interest rates passed on to savers. Admittedly, this has now led to bank chiefs being summoned by the FCA this morning for a dressing down, but barring an improbable intervention to compel action from these institutions, this meeting is likely to produce more hot air than any kind of meaningful change in approach.

FX Elsewhere

In the big news overnight, the RBA held the cash rate target at 4.1%, in line with Bloomberg consensus and our pre-announcement call. Whilst the meeting was not seen as a done deal by any stretch, especially given the RBA’s tendency to surprise market expectations, the most recent CPI release showing that Australian inflation cooled far faster than expected had shifted the balance of risks towards a potential over tightening of policy. Swap pricing for this morning’s announcement concurred, suggesting that there was only a 20-30% chance of a rate hike. Given this, the market reaction to the decision has been muted, with AUDUSD ticking down on the news but ultimately clawing back those losses to trade around pre-announcement levels.



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