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U.S – China Trade Deal “Over”! The News Hits the Wires as the Markets Prepare for June’s PMIs.

Bob Mason

Earlier in the Day:

It was a busier start to the day on the economic calendar on Tuesday. The Aussie Dollar and Japanese Yen were in action early on, with prelim June private sector PMIs in focus.

Outside of the numbers, the latest COVID-19 news also drew attention early in the day, supporting riskier assets.

This time around, it was U.S anger over China’s apparent delay in sounding the alarm bells that weighed on risk sentiment. Reports hit the news wires this morning of U.S trade adviser Navarro stating that the trade deal with China is ‘Over”.

Looking at the latest coronavirus numbers

On Monday, the number of new coronavirus cases rose by 126,214 to 9,170,758. On Sunday, the number of new cases had risen by 131,020. The daily increase was lower than Sunday’s rise, while up from 115,910 new cases from the previous Monday.

Germany, Italy, and Spain reported 952 new cases on Monday, which was up from 917 new cases on Sunday. On the previous Monday, just 855 new cases had been reported.

From the U.S, the total number of cases rose by 29,864 to 2,386,521 on Monday. On Sunday, the total number of cases had risen by 26,079. On Monday, 15th June, a total of 19,412 new cases had been reported.

From Australia

The Commbank Manufacturing PMI rose from 44 to 49.8 in June, according to prelim figures. Economists had forecast a rise to 49.3. Service sector activity impressed with a return to expansion, however. The Services PMI jumped from 26.9 to 53.2 Economists had forecast a rise to 27.7.

The Aussie Dollar moved from $0.69232 to $0.69209 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.52% to $0.6872. A reversal kicked in from the news from the U.S on the U.S – China trade agreement…

For the Japanese Yen

The Manufacturing PMI fell from 38.4 to 37.8, while the Services PMI increased from 26.5 to 42.3. Economists had forecast PMIs of 47.5 and 40.6 respectively.

According to the prelim June Survey,

  • Manufacturing production fell at an accelerated rate and the most severe since March 2009. Employment across the sector also fell at a faster pace in June.
  • For the services sector, new business declined at a materially slower pace in June, with employment stabilizing.
  • Service sector support came from the lifting of the state of emergency.

The Japanese Yen moved from ¥106.931 to ¥106.928 against the Dollar upon release of the figures. At the time of writing, the Japanese Yen was up by 0.13% to ¥106.77 against the U.S Dollar.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.48% to $0.6449, with chatter from the U.S weighing.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Prelim June private sector PMIs are due out of France, Germany, and the Eurozone.

We can expect plenty of influence from the numbers, though the services PMI should garner greater interest.

The ECB had been looking towards a service sector-driven recovery before the COVID-19 pandemic. This reliance may be even greater now as unemployment bites across the Euro bloc.

At the time of writing, the EUR was down by 0.20% to $1.1239. Negative chatter from the U.S administration drove the EUR into the red early on.

For the Pound

It’s a relatively busy day ahead on the economic calendar. June’s prelim private sector PMIs are due out later today.

Expect the market focus to be on the Services PMI that will need to see a marked improvement. It could get a little dicey for the Pound if any weak numbers are accompanied by negative Brexit updates…

At the time of writing, the Pound was down by 0.18% to $1.2446, with risk aversion weighing.

Across the Pond

It’s a busy day ahead on the U.S economic calendar. Key stats include new home sales figures for May. And prelim June private sector PMIs.

Again, we would expect the Services PMI to have the greatest impact on the day. Don’t expect too much from the new home sales and manufacturing PMI, barring particularly dire numbers.

For the markets, an upward trend from April’s historic lows would need to continue across the private sector. Any weak numbers and expect risk aversion to sweep across the global financial markets.

Away from the numbers, geopolitics and COVID-19 news from the U.S will remain a key driver.

Monday’s announcement by Navarro drove Dollar demand early.

At the time of writing, the Dollar Spot Index was up by 0.14% to 97.178.

For the Loonie

It’s another particularly quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

A lack of stats will leave the Loonie in the hands of market risk sentiment and COVID-19 news and updates and PMI numbers.

Any disappointing PMI numbers from the Eurozone or the U.S would likely test sentiment towards the economic outlook… The markets are hopeful of a V-shaped economic recovery. Today’s PMIs could give some idea of what lies ahead.

An end to a trade agreement between the U.S and China would overshadow any positive PMIs, however.

At the time of writing, the Loonie was down by 0.24% to C$1.3554 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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