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A surprise build in API oil stockpiles, along with falling European bond yields, combined forces to drag higher-yielding currencies down during the U.S. session.

  • U.S. core PCE price index posted another 0.1% uptick as expected
  • U.S. personal spending up by 0.1%, personal income flat
  • July ISM manufacturing PMI down from 57.8 to 56.3 vs. 56.4 forecast
  • U.S. construction spending down by 1.3% vs. projected 0.4% dip
  • U.S. total vehicle sales rose from 16.5M to 16.7M
  • New Zealand GDT auction yielded 1.6% drop in dairy prices

Major Events/Reports

U.S. manufacturing PMI

For the month of July, the ISM manufacturing PMI dropped from 57.8 to 56.3, slightly lower than the consensus at 56.4, to indicate a slower pace of growth for the industry.

A closer look at the components of the report reveals that the overall decline was spurred by a number of tiny dips in new orders, production, employment, supplier deliveries, and customer inventories. Only the sub-index for prices ticked higher from 55.0 to 62.0.

The final manufacturing PMI from Markit enjoyed a small bump up from 53.2 to 53.3 to reflect a slightly faster pace of industry expansion than initially reported.

U.S. personal income & spending

Other reports from Uncle Sam came in line with estimates, except for the personal income report which showed a flat reading in June. This didn’t stop consumers from shopping, however, as personal spending posted the estimated 0.1% uptick for the month.

Meanwhile, the core PCE price index, which is said to be the Fed’s preferred inflation measure, also came in line with expectations of a 0.1% increase. U.S. stock indices stayed in the green for the day:

  • Dow 30 index is up 72.80 points to 21,963.92 (+0.33%)
  • S&P 500 index is up 6.05 points to 2,476.35 (+0.24%)
  • Nasdaq is up 14.81 points to 6,362.94 (+0.23%)

Commodities keep sliding

Commodities continued their slide from the late London session as the American Petroleum Institute reported a surprise build in stockpiles.

API crude oil inventories rose by 1.78 million barrels instead of the projected drop of 2.9 million barrels. This led market watchers to speculate that the Energy Information Administration might report an increase in supply later this week as well.

Over in New Zealand, the Global Dairy Trade auction yielded a 1.6% drop in dairy prices after posting a 0.2% uptick in the previous instance.

Weaker European bond yields

The positive sentiment in the London trading session was not sustained throughout the day as falling German bond yields after the latest auction contributed to euro weakness.

  • German 10-year bond yield down to 0.53%
  • French 10-year bond yield down to 0.79%
  • Italian 10-year bond yield down to 2.07%

Analysts pointed to the region’s flash GDP reading which failed to impress and bolster ECB tapering expectations. Some say it was also due to Germany’s final manufacturing PMI being downgraded from 58.3 to 58.1, which is its lowest reading in five months.

Major Market Mover(s):


The dollar ticked slightly higher for the day as data came in mostly in line with estimates.

EUR/USD is down from 1.1817 to a low of 1.1785, USD/JPY popped up from a low of 109.92 to 110.50, USD/CHF is up to .9660, and GBP/USD retreated to 1.3205.


Watch Out For:

  • 11:45 pm GMT: New Zealand employment change q/q (0.7% expected, 1.1% previous)
  • 11:45 pm GMT: New Zealand unemployment rate (4.8% expected, 4.9% previous)
  • 11:45 pm GMT: New Zealand labor cost index (0.5% expected, 0.4% previous)
  • 2:30 am GMT: Australia building approvals (16.6% expected, 17.0% previous)