Intraday Market Thoughts

UK Construction PMI Contracts, Eurozone Monthly PPI Negative

by Ashraf Laidi
Jul 3, 2012 13:26

RBA keeps rates steady; UK construction PMI fell and mortgage approvals declined; Eurozone PPI dropped; Spanish and Italian yields lower. Market turns to factory orders. Premium Insights in progress for EURUSD, USDJPY, USDCAD, GBPUSD and gold. See more below.

AUD remains stuck at the confluence of the 100 & 200 DMAs after the RBA left rates unchanged at 3.5% as expected. Most economists now forecast rates to remain on hold in August as well. In the statement the RBA noted stronger economy than predicted, unchanged inflation outlook and further weakness in Europe. AUDUSD trades around 1.0260.

UK construction sector contracted for the first time since 12/2010 as the construction PMI dropped to 48.2 in June from previous 54.4. This was the sharpest fall in construction since 02/2009. Employment declined for the first time in four months and new orders fell as well. Other news from the UK confirmed that total lending to individuals reached GBP 1.3 bln in May from April's GBP 1.4 bln and that mortgage approvals declined to 51.1K in May from previous 51.6K. GBPUSD is slightly weaker around 1.5675.

Eurozone PPI declined 0.5% in May from previous 0.1% m/m and eased to 2.3% from 2.6% y/y which is the lowest rate since 03/2010. EURUSD continues to trade around 1.2590 in about 50 pip range, perhaps because traders do not want to initiate new positions ahead of Thursday's rate decision. Market implied probability of a 25 bps cut currently stands around 38%.

Spanish and Italian 10 year yields continue to decline, currently trading around 6.33% and 5.69% respectively.

US data is limited today to factory orders that are expected to rise 0.1% in May after declining 0.6% in April.

Fridays Premium Insights are in progress for EURUSD, USDJPY, GBPUSD,USDCAD, AUDUSD and gold, while GBPJPY has been stopped out. Direct access is found here: non subscribers can click here:


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