FX round-up: US dollar jumps as own PMI outstrips rivals

A better-than-expected print on the state of factory sector conditions in the States relative to those in China, the euro area and the UK saw the US dollar climb sharply on Monday.

Far from falling to 58.0 as economists had forecast, the Institute for Supply Management's manufacturing sector Purchasing Managers' Index jumped from a reading of 58.7 for May to 60.2 in June.

Since 1985, the closely-followed gauge had only surpassed the 60.0-point threshold on 11 occasions.

Now it was 12.

That print pushed the US dollar spot index higher to 95.0860 and to just below its 52-week highs of 96.5120. In parallel, euro/dollar was down 0.72% at 1.16055 and against the yen the dollar was gaining 0.14% to 110.880.

Significantly, China's yuan meanwhile was 0.71% weaker to 6.6680 versus the American currency.

Sterling was also down, losing 0.65% to trade at 1.31232 against the US dollar, whereas against the euro it was edging higher by 0.04% to 1.1308.

The resilience in Gbp/euro was despite a report in The Times according to which the Prime Minister's lead Brexit negotiator, Oliver Robbins, had briefed secretaries of state ahead of Friday's talks at Chequers, telling them they needed to be "realistic" about what could be achieved.

On a related note, according to consultancy Deloitte's July survey of British finance directors, 75% of them were now "pessimistic" about Brexit, up from 68% in the first quarter.

Likely accounting for the strength in the pound, at the start of the week investor focus was almost as much on the German coalition government's ongoing travails as on global trade concerns.

Key in that respect, markets were expectant ahead of a meeting scheduled for later in the evening between German Chancellor Angela Merkel and the leader of her CDU party's main ally, its Bavarian sister party, the CSU.

On Sunday, Horst Seehofer, the head of the CSU, had threatened to resign from his post as interior minister due to differences with Merkel on what the country's immigration policies should be.

Acting as a backdrop to all of the above naturally were the ongoing concerns around global trade.

In particular, traders were expectant ahead of the 6 July, when US tarriffs on $34bn-worth of Chinese goods were set to go into effect.