US Dollar Wins Worst Performing in G10 Group

The US dollar fell against all major trade partner currencies in early North American trade while the pound sterling outperformed the G10 basket following the release of S&P Global PMI surveys for April.

Dollar pairs fell widely following the North American open, making the greenback the worst-performing currency in the G10 grouping while placing it close to the bottom of the broader G20 basket, behind only the Chinese renminbi.

Losses built and broadened while US government bond yields fell across the curve after S&P Global PMI surveys surprised sharply on the downside of expectations for April in stark contrast to outcomes reported in Europe and Japan previously.

The S&P Global Flash Manufacturing PMI fell to 49.9 in April, from 51.9 previously, leaving it below the consensus favoring an increase to 52.0 and suggesting the US industrial sector may have slipped into recession this month. Meanwhile, the S&P Global Flash Services PMI fell to 50.9, from 51.7 previously, when it had also been expected to edge higher to 52.0.

A quick summary of foreign exchange activity heading into the US lunch hour showed that GBPUSD was trading 0.76% higher at 1.2442, up sharply from the prior session’s lows in the 1.2298 area, making it the best performing currency in the G10 basket and the second best performer in the G20 group behind only the Korean won.

Sterling was already an outperformer prior to the release of the US PMI surveys after rallying in response to the latest remarks from Bank of England Chief Economist Huw Pill and a better-than-expected S&P Global Flash Services PMI. Pill told the London Campus of the Chicago Booth Business School that “we still have a reasonable way to go,” before he can be confident that UK wage growth and services sector inflation have been squeezed down to a level consistent with the 2% inflation target.

His cautious remarks were in contrast to the latest from Governor Andrew Bailey and Deputy Governor Dave Ramsden, who both said the economy is on track to deliver February’s Monetary Policy Report forecast and alluded to the possibility of UK interest rates being cut some time this summer. Previously, the UK services PMI rose much faster than was expected when climbing to an 11-month high in April, though the manufacturing sector was reported to have slipped into recession while the pace of output price inflation in the services sector moderated to its slowest pace since February 2021.

Elsewhere in Europe, USDEUR  was 0.42% higher at 1.0699, up sharply from the prior session’s lows around 1.0622 while placing the single currency around the middle of the G10 rankings for the session.

The weakening dollar was a significant tailwind for the euro, though the single currency also appeared to benefit from remarks made by Bundesbank President Joachim Nagel and the earlier release of better-than-expected S&P Global Services PMIs. Nagel reportedly told the Association of German Banks that he sees momentum in the German manufacturing sector accelerating and that he would prefer to see more economic data before committing to a June interest rate cut.

Previously, USDEUR was lifted during the European morning after S&P Global Services PMIs surprised strongly on the upside of expectations across the continent. Notably for the European Central Bank, average selling prices rose at an above-average pace “to hint at stubborn inflationary pressures,” with many companies reporting “higher wage rates as a key inflation driver alongside greater energy and fuel costs.” Europe’s manufacturing PMIs, however, signalled an ongoing recession in the sector.

In Asia, USDJPY was 0.01% lower at 154.82 during the North American morning after rising from lows of around 154.65 overnight when the Jibun Bank PMI surveys both surprised sharply on the upside of expectations.

The Jibun Bank Composite Flash PMI rose to 52.6, from 51.7 in March, led by a strong increase in the services sector component of the index and an easing of an earlier reported recession in the manufacturing sector.

Commentary from Japanese government officials was also supportive of the yen after member of the House of Councillors Satsuki Katayama was reported to have said authorities could intervene to lift the currency from its current 34-year lows at any time.

Attention in Japan now shifts to the 19:50 ET release of the Services Producer Price Index on Tuesday, and Friday’s release of Tokyo Core CPI data and the April policy decision from the Bank of Japan.

In North America, USDCAD  was trading 0.18% lower at 1.3675 after falling through the prior session’s lows around 1.3688, which also marked the pair’s lowest level since April 12.

The Canadian dollar was a relative laggard among major currencies on Tuesday. Similar to the New Zealand dollar, Japanese yen and Swiss franc, although the Loonie remained the third best performer in the G10 basket for the recent week. There was no economic data released on Tuesday in Canada where attention now shifts to Wednesday’s retail sales figures for March. The summary of deliberations from the BoC’s April Governing Council meeting will also garner attention on Wednesday.