Dollar Continues Decline Ahead of Latest PMI Data


GBP

GBP/USD is currently 1.2760 (interbank) whilst GBP/EUR has declined and is currently trading at 1.1644 (interbank).

This morning, the S&P Global UK Services Purchasing Managers Index rose to 52.5 in July from 52.1 in June, slightly higher than the preliminary estimate of 52.4.

The survey highlighted increased business optimism since the July 4 election, which resulted in a decisive win for Starmer's Labour Party.

The composite PMI, merging services data with the previous week's manufacturing survey, increased to 52.8 in July from 52.3 in June, revised from a flash estimate of 52.7.

Additionally, a measure of new business reached its highest level since May last year, and the future activity index hit a five-month peak, attributed by S&P Global to the election results and expectations of lower interest rates.

Last week, the Bank of England cut interest rates for the first time since March 2020, lowering them to 5.0% from a 16-year high of 5.25%.

In a subsequent press conference, BoE Governor Andrew Bailey emphasized the need to maintain low inflation and cautioned against cutting rates too quickly or excessively. Regarding service sector inflation, Bailey noted that it might rise slightly in August before easing later in the year.

Today’s Events (GMT):

09:30 - UK Composite PMI (Jul) - Actual: 52.8 vs Forecast: 52.7

09:30 - UK Services PMI (Jul) - Actual: 52.5 vs Forecast: 52.4

EUR

EUR/USD is currently trading at 1.0950 (interbank).

This morning, eurozone business activity stalled last month as the services sector's weak growth was exacerbated by a deeper decline in manufacturing.

HCOB's composite Purchasing Managers' Index for the euro area, compiled by S&P Global and seen as a reliable indicator of economic health, fell to 50.2 in July from June's 50.9.

HCOB's final services PMI for the eurozone dropped to 51.9 last month from 52.8, aligning with a preliminary estimate.

The decline occurred despite firms raising prices more slowly in July compared to June. Services inflation, closely watched by the European Central Bank, moderated, with the industry's output prices index falling to 52.9 from 53.5.

After delivering an expected rate cut in June, the ECB kept its deposit rate at 3.75% last month but is anticipated to make two more cuts this year, possibly as early as September.

Today’s Events (GMT):

08:55 - Germany Services PMI (Jul) - Actual: 52.5 vs Forecast: 52.0

09:00 - Eurozone Composite PMI (Jul) - Actual: 50.2 vs Forecast: 50.1

09:00 - Eurozone Services PMI (Jul) - Actual: 51.9 vs Forecast:51.9

USD

The dollar index, which measures the currency against a basket of other major currencies, is currently trading at 102.279, a 4½ month low.

The dollar weakened significantly last week as the U.S. economy added far fewer jobs than expected in July, further indicating a cooling in labor demand. Nonfarm payrolls were 114,000 last month, down from a revised 179,000 in June, per Labor Department data. Economists had expected 177,000 jobs in July. Meanwhile, the unemployment rate rose to 4.3%, up from 4.1% in June, increasing for the past three months.

Additionally, the Fed maintained its benchmark overnight interest rate at 5.25%-5.50%, but Chairman Jerome Powell hinted at potential rate cuts in their next meeting.

Markets are now pricing in a 75% chance of a double cut from the Fed in September, with a rate cut seen as certain for the September 18 meeting.

Today, investors will focus on the U.S. ISM Services PMI data for July.

Today’s Events (GMT):

14:45 - S&P Global Composite PMI (Jul) - Forecast: 55.0

14:45 - S&P Global Services PMI (Jul) - Forecast: 56.0

15:00 - ISM Non-Manufacturing PMI (Jul) - Forecast: 51.4

22:00 - FOMC Member Daly Speaks

CAD

USD/CAD is currently trading at 1.3860 (interbank) in today’s session.

The Canadian dollar weakened to a nine-month low against the stronger U.S. dollar on Thursday, as geopolitical tensions and weak global manufacturing data weighed on investor sentiment.

Speculation that the Bank of Canada (BoC) might cut interest rates again this year could undermine the CAD. Markets anticipate another 25 bps rate cut this year, with nearly 60% odds of a cut in the BoC's September meeting.

Oil futures continued to decline as fears of a U.S. recession outweighed supply concerns from rising tensions in the Middle East. Iran-backed Hezbollah launched missiles at Israel in retaliation for the assassination of Hamas leader Ismail Haniyeh by an Israeli airstrike in Tehran. Brent crude fell 1% to $75.18 per barrel, while U.S. West Texas Intermediate dropped 0.9% to $71.71.

Statistics Canada will release its latest job market data on Friday, publishing the labour force survey for July. The Canadian economy lost 1,400 jobs in June, with the unemployment rate at its highest level in over two years.

No significant events are scheduled for today

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