Disappointing flash PMI results across Europe and the Asia Pacific region provided support for the US dollar after its recent decline. Reports that exchange rate discussions were included in US bilateral trade talks have rattled Asian currencies, especially given the region’s significant unhedged dollar exposure. The South Korean won, which surged by 1.6% the previous day, gave back most of those gains. While the Taiwan dollar extended its winning streak, the greenback gained against all G10 currencies except the yen. Stock markets showed strain as well, with US losses dragging Asia lower. Gold prices pulled back from a recent nine-day high, and oil slipped after OPEC+ confirmed plans to increase output.
Asia Pacific Markets
The Japanese yen remained under pressure as markets reacted to conflicting reports on US-Japan currency discussions. Despite an initial dip to a two-week low near JPY142.80, the dollar rebounded but stalled near JPY143.50. Japanese PMI data had limited impact—manufacturing stayed below the 50-mark, and services weakened further.
Meanwhile, in Australia, the AUD climbed after recovering from central bank-driven losses, reaching a five-day high. However, sentiment weakened slightly despite stable PMI data, indicating consolidation rather than momentum. The Australian services sector edged down slightly, and the composite PMI reflected a modest cooling in activity across the board.
European Markets
The euro rallied past its 20-day moving average before retreating on weaker-than-expected PMI figures. Both manufacturing and services in the eurozone fell below the 50 threshold, signaling contraction. Germany's composite output fell to its lowest this year, and France’s reading, while slightly improved, stayed in negative territory. These indicators reinforced expectations of a rate cut by the ECB in early June.
The British pound reached a three-year high but began to consolidate amid mixed PMI data. While UK services inched back above 50, manufacturing remained firmly in contraction, and the overall composite remained subdued, raising concerns about sustained recovery.
American Markets
The US dollar index dropped below 99.50 but found support amid financial market jitters and signs of labor market softening. The greenback is currently trading in a narrow range, facing resistance near the 100 level. Job market data continues to show gradual cooling, with new claims for unemployment benefits at their highest average since last October. Slower immigration, government layoffs, and lower tourist activity are compounding risks. Despite Fed Chair Powell’s comments on strong real sector data, today’s PMI may have limited impact, while home sales are expected to rebound.