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Oh so quiet

August

In the olden days August was traditionally a quiet month in financial markets as the movers and shakers decamped to their island retreats. Perhaps this year the pandemic will keep them at home, but that does not necessarily mean they will remain engaged. They seemed not to be on Monday.

The only currency mover was the SEK, which strengthened by an average of 0.6% following the Swedish manufacturing purchasing managers’ index for July. It had been expected to deteriorate by half a dozen points from 47.3. Instead, the June reading was upwardly revised to 47.6 and the July measure came in at 51.0. The figure was far from world-beating (it was in line with Germany) but it was sufficiently better than forecast to take the krona to the front of the pack.

Take the SEK out of the equation and the day’s currency movements were negligible, with just 0.4% separating the leading Canadian dollar from the lagging NZ dollar. Sterling was bang in the middle, on average unchanged on the day and up 1.8% from a week ago. Britain’s manufacturing PMI was a slightly disappointing 53.3, a third of a point short of the predicted 53.6.

 

Mostly growth

Monday’s round of manufacturing PMIs was mostly above forecast and higher on the month. The glaring exception was Switzerland’s. It just missed the cut at 49.2, two points shy of forecast.

In Euroland, Greece (48.6 and a two-month low) and the Netherlands (47.9 at a four-month low) also found themselves in the contraction zone but neither is economically significant enough to affect the euro. The pan-Euroland reading of 51.8 was better than expected.

The two US manufacturing PMIs from ISM and Markit came in at 54.2 and 50.9. The ISM figure was a point and a half ahead of forecast and the Markit number was half a point short. The data were not enough to support the USD when it came under pressure during the afternoon. It is net unchanged against the EUR and an almost-invisible tenth of a cent firmer against the GBP.

 

RBA steady

Most of the interesting stuff today takes place outside the London session. Australia’s balance of trade, retail sales and central bank rate decision have been and gone. New Zealand’s employment data have yet to come.

The Reserve Bank of Australia’s decision to keep its Cash Rate – and the target for the yield on 3-year government bonds – unchanged at 0.25% came as no surprise. In its statement the RBA indicated that its benchmark rate will remain low for a considerable time. Australia’s trade surplus widened as exports grew by three times as much as imports and retail sales increased by 2.7% in June, a little more than expected.

There is nothing worthwhile from Europe this morning. After lunch come Canada’s manufacturing PMI and US factory orders. Tonight brings Australia’s construction and services PMIs and mortgage lending. New Zealand reports on the labour market: analysts foresee a rise in unemployment from 4.2% to 5.8% in the second quarter.

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