US manufacturing data for July were generally positive. The Institute for Supply Management’s Manufacturing PMI rose from 53.3 to 55.6, exceeding the market forecast of 54.0 and reaching its highest level since May 2022. The final S&P Global Manufacturing PMI remained unchanged at 53.9, compared with the preliminary estimate of 53.8.
The figures confirm that one of the main sectors of the US economy remains resilient. New orders, production and employment were all in expansion territory, while manufacturers continued to report elevated input prices and longer delivery times.
The data keep the possibility of further monetary tightening by the Federal Reserve in focus, although they do not guarantee an imminent rate increase. CME FedWatch continued to show a meaningful probability of a September move at the time of writing, but market-implied expectations remain volatile and may change rapidly as new inflation and labor-market data are released.
New York Fed President John Williams recently said that inflation remained above the regulator’s target but was expected to ease gradually in the coming quarters. He stressed that further policy decisions would depend on incoming data, changes in the economic outlook and the balance of risks rather than on a predetermined interest-rate path.
Euro Area
The euro is weakening against the British pound today while strengthening against the Japanese yen and the US dollar.
Investors are assessing June retail-sales data from Germany and the final July manufacturing figures for the eurozone. The HCOB Eurozone Manufacturing PMI rose from 51.4 in June to 51.9 in July, slightly below the preliminary estimate of 52.0.
The corresponding output index increased to 52.9, its highest level since March 2022. However, the expansion was partly driven by companies completing previously accumulated orders rather than by a strong increase in demand. New orders rose only marginally, while export orders declined again.
German retail sales were also weaker than expected, falling by 1.1% month-on-month compared with a forecast decline of 0.4%. Sales were 0.2% lower than a year earlier.
The Middle East conflict remains an important risk for the European economy. Higher energy and transportation costs could reduce household purchasing power, weaken consumption and keep inflationary pressure elevated. The European Central Bank is therefore likely to retain a cautious and data-dependent approach.
The euro’s current technical position and the main breakout levels are examined in the latest EUR/USD outlook.
United Kingdom
The British pound is posting moderate gains against the euro, Japanese yen and US dollar today.
The final UK Manufacturing PMI declined from 52.5 in June to 51.9 in July, reaching a four-month low and coming in below the preliminary estimate of 52.8.
Nevertheless, the underlying data were more resilient than the headline figure suggested. Manufacturing output expanded at its fastest pace in almost two years, while new orders and export sales continued to increase.
Employment was broadly unchanged, and input-cost inflation slowed to its lowest level since February. Small manufacturers reported a modest decline in production, while medium-sized and large companies continued to expand output.
The report therefore points to slower growth rather than a broad deterioration in British manufacturing. However, renewed disruption to shipping through the Strait of Hormuz could increase energy, freight and production costs, weakening growth while keeping inflation elevated.
UK Chancellor of the Exchequer John Healey has confirmed that his first Budget will be presented on October 28. He said the government would continue to follow its fiscal rules and maintain discipline over spending and borrowing.
Sterling is also approaching an important technical area, discussed in the recent GBP/USD forecast.
Japan
The Japanese yen is weakening against the euro, British pound and US dollar today.
The currency is giving back part of the sharp gains recorded after the coordinated foreign exchange intervention conducted by the Japanese and US authorities on Friday.
Japan’s Ministry of Finance said the operation was intended to counter excessive volatility and disorderly movements in the yen. US Treasury Secretary Scott Bessent also confirmed the coordinated action and said Washington remained in close contact with Japan’s Ministry of Finance and the Bank of Japan.
The intervention was initiated by the two countries’ financial authorities, although central banks may have performed operational roles in the transactions.
Market participants remain cautious about its lasting effect. The yen’s weakness reflects broader factors, including interest-rate differentials, Japan’s dependence on imported energy and expectations regarding future Bank of Japan policy. A one-time intervention may slow the decline without reversing the underlying trend.
Australia
The Australian dollar is strengthening against the euro, British pound, Japanese yen and US dollar today.
The currency is receiving support from stronger domestic economic data. The S&P Global Australia Manufacturing PMI rose from 51.5 to 52.0 in July, exceeding the market forecast of 51.7 and confirming continued expansion in the sector.
The Australian Bureau of Statistics reported that household spending increased by 0.8% month-on-month in June on a current-price, seasonally adjusted basis, reaching approximately AUD 81.3 billion. Spending was 6.0% higher than a year earlier, while the seasonally adjusted volume measure increased by 0.7% during the second quarter.
Annual consumer inflation stood at 3.8% in June, while trimmed mean inflation was 3.6%. Australia’s Producer Price Index for final demand also increased by 3.6% year-on-year in the June quarter.
Resilient household spending, continued manufacturing growth and above-target inflation keep the possibility of further Reserve Bank of Australia tightening in focus. However, the next decision will depend on a broader set of inflation, employment and economic-growth indicators.
Oil
Oil prices have shown mixed dynamics today, with an early advance followed by a sharp decline.
At the beginning of the session, investors focused on statements from Iranian officials that Tehran was not holding direct negotiations with the United States and was instead discussing shipping arrangements through the Strait of Hormuz with Oman.
Crude prices subsequently reversed sharply lower after US Treasury Secretary Scott Bessent said Washington and Tehran could reach an agreement as early as Tuesday or Wednesday. According to Bessent, a potential deal would restore freedom of movement for commercial vessels through the strait.
The comments increased expectations that geopolitical risks to maritime traffic and oil supplies could ease. However, no final agreement had been announced at the time of writing, and Iranian officials continued to deny that direct negotiations with Washington were underway.
Investors are also awaiting the American Petroleum Institute’s weekly report on US crude inventories. Market forecasts point to a decline of approximately 2.0 million barrels. A larger-than-expected draw could provide some support to prices, although developments surrounding the Strait of Hormuz are likely to remain the dominant market driver.
Recent changes in energy and precious-metals prices are covered in the broader commodities review.
