USD

The U.S. dollar is on the upswing this morning, up around 0.1% as Q3 kicks off with a heavy dose of global manufacturing data.

Earlier releases from Japan, China, Europe, and the U.K. painted a gloomy picture for some of the world's biggest economies, helping boost demand for the greenback. Later today, the June ISM Manufacturing PMI for the United States is set for release at 10:00 AM EST, and markets anticipate a slight uptick from the May print but still expect a contraction in the sector for an eighth month out of the past nine.

Meanwhile, last Friday's CFTC report showed a noticeable increase in speculative short positions on the dollar, suggesting traders are bearish on the greenback.

EUR

The euro begins Q3 in the red, although slowly climbing off the day's lows after another disappointing slate of European manufacturing data.

In June, the Eurozone Manufacturing sector experienced a substantial decline, reflected in the revised IHS Markit Manufacturing PMI of 43.4, the most significant fall since May 2020. Output, new orders, and staffing levels contracted significantly, while input costs and output charges also saw noticeable declines.

Europe's largest economy, Germany, saw its fastest output contraction in eight months, registering a dismal 40.6 for its June manufacturing PMI. On the other hand, France saw the S&P Global France Manufacturing PMI improve slightly to 46 in June but still posted its fifth consecutive month of contraction.

GBP

The Pound closed out Q2 with a solid 3% gain against the Greenback, although it has lost some momentum over the past couple of weeks. The trend continues today as GBP trades in the red heading into the US session after the latest UK manufacturing PMI came in at a six-month low.

June's S&P Global/CIPS UK Manufacturing PMI was revised to 46.5, signifying the 11th consecutive month of contraction, albeit at a reduced pace. Output and new orders declined, while employment levels have decreased considerably since March. In addition, business confidence amongst those surveyed slipped to its lowest level in six months.

JPY

New quarter, same struggles for the Japanese yen. The JPY is down around 0.4% against the dollar this morning as Japanese officials continue to use rhetoric to try and keep the sinking yen afloat but to no avail.

Given that the yen has fallen back towards the same level it was last September when Japanese officials last intervened to backstop the yen, traders are beginning to believe another market intervention may be in the cards sooner rather than later.

Meanwhile, the au Jibun Bank Japan Manufacturing PMI held steady at 49.8 in June, marking the fifth contraction in Japan's manufacturing sector this year. Output and new orders declined, although employment increased and supplier performance improved.

CAD

The Loonie is mostly unchanged this morning in what is expected to be a quiet start to the week for USD/CAD, with Canadian traders out on holiday today and U.S. traders following suit tomorrow for Independence Day.

Looking ahead, Canada's June S&P Global Manufacturing and the BoC Business Outlook Survey are both on deck tomorrow, scheduled for release at 9:30 AM EST. However, this week's headline release in Canada will be June's unemployment numbers, set for release this Friday. These will be the last significant pieces of information for CAD traders ahead of next week's BoC meeting, where the odds of another 0.25% rate hike are currently around 50-50.

MXN

The Mexican peso had another strong showing in Q2, finishing up nearly 5% against the dollar for the quarter and close to 12% year-to-date. Today, the peso is mostly flat despite broader strength in the greenback this morning.

Despite a quiet start to the week, things are expected to pick up for MXN traders as the week progresses. June consumer confidence data is scheduled for release this Wednesday, followed by Friday's highly anticipated June inflation numbers.

With inflation on a steady decline since January, although still above Banxico's target range, Friday's inflation data could go a long way in determining how long Banxico may be willing to wait before making its first rate cut since embarking on its two-year-long tightening cycle.

BRL

The Brazilian real begins the day up over 0.3% as it looks to build on its stellar Q2 performance that saw it gain well over 5% against the dollar.

There will be many critical data points for BRL traders to chew on over the next 24 hours, headlined by the latest manufacturing PMI set for release this morning. Expectations are for the June read to come in at 45.7, worse than May's 47.1 and well into contraction territory for the eighth consecutive month.

Also on the Brazilian economic calendar this week is June's trade balance data later this afternoon, as well as June inflation and May industrial output on deck tomorrow.

CNY

After registering a large loss against the dollar in Q2, the yuan is trading sideways this morning as traders digest the latest manufacturing data out of China and word from the PBoC that they will step in to guard against further currency depreciation.

The Caixin China General Manufacturing PMI dropped to 50.5 in June, slowing from May but still better than market expectations. Output and new orders increased, albeit at a slower pace, while employment declined and export sales were flat.

Meanwhile, after its Q2 monetary policy committee meeting, the PBoC has expressed its commitment to stabilize the CNY exchange rate. This follows recent actions from the PBoC to set stronger fixes in the onshore market and work by state banks to sell US dollars to prop up the yuan.