Dollar Gains for Second Day Amid Strong U.S. Manufacturing Data

  • USD/JPY eclipses 113.00 as yen falls after LDP loss in Tokyo
  • Pound drops to low as U.K. economy flags after election

The dollar rose for a second day, climbing to a fresh high for the session after data showed stronger-than-expected growth in the U.S. manufacturing sector.

The dollar rose around 0.5 percent, its biggest gain since June 15, in a subdued and abbreviated trading session ahead of the July 4 Independence Day holiday; Canadian markets were closed in observance of the Canada Day holiday. The dollar gained versus all of its G-10 peers, paced by a more than 0.9 percent gain against the yen.

  • The yen fell sharply Monday, reversing slight initial gains seen after Japan’s LDP Party suffered steep losses in a Tokyo prefectural election. The vote was seen as a barometer of opinion as Japan faces a general election by the end of 2018
  • USD/JPY rose to a six-week high at 113.46 after the U.S. manufacturing data, extending gains above the 113.08 interim high seen after stop-loss buy orders were tripped over 113.00, according to a trader in London familiar with the transactions who asked not to be identified because they are not authorized to speak publicly. USD/JPY extended gains as UST 10y yield rose to a new high for the day above 2.35% and stocks advanced
  • Overnight, the pair had dropped to a low at 111.91 as the yen gained amid choppy trading after the election result became known, though USD buying quickly emerged from U.S. banks to lift the dollar back over 112.00, a trader in Asia said. Japan’s June Tankan report showed large manufacturers were more optimistic than forecast, as the DI rose to 17 vs est. 15
  • EUR/USD fell to a fresh low 1.1356 as bids were filled in the zone from 1.1390 to 1.1375, though the pair was later cushioned by demand for EUR/JPY as JPY losses extended. EUR/USD may find technical support near 1.1349 from the June 27 high or at 1.1300 from the post-U.S. election peak, with traders in Europe still showing a preference to buy the pair on any dip toward 1.1300
  • GBP/USD fell to a new low for the day at 1.2932, extending a decline that began after U.K. Markit PMI fell more than expected, fueling concern over the health of the U.K. economy as the govt of PM Theresa May pushes ahead with Brexit negotiations 
  • The Institute for Supply Management reported that its June barometer of manufacturing rose to 57.8, surpassing estimates for a gain to 55.3. The data included gains in both the new orders and employment indexes. Focus for the week will shift to the minutes of the Federal Reserve’s June meeting due Wednesday and the monthly U.S. employment report for June, set for release Friday.
  • U.S. stock markets will close at 1pm ET Monday, while the bond market will close at 2pm; U.S. markets will remain closed Tuesday
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