Manufacturing PMIs Disappoint Once More But Services is What Central Banks Are Obsessed With

By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

We may be seeing a bit of a trading lull at the start of the week with tomorrow’s US bank holiday tempting many into an extended weekend.

The economic calendar looks busy but with a large portion being PMI revisions, that doesn’t necessarily equate to an abundance of trading activity. The revisions are often small and don’t really move the needle in terms of expectations for the economy and, at this moment, interest rates.

And then there’s the fact that manufacturing being deep in contraction territory is nothing new and what revisions we did see doesn’t really change that. Even as far as prices are concerned, central banks at this stage are far more concerned with what’s happening in services than manufacturing so even that providing welcome disinflationary pressure won’t be enough.

Saudi and Russian cuts no game-changer for oil

Oil prices were rising for a fourth session, with output curbs from Saudi Arabia and Russia initially giving fresh momentum to the recent recovery. The Saudis announced a one-month extension to their voluntary one million barrel cut, taking the reduction to the end of August which was swiftly followed by Russia announcing that it will cut exports by 500,000 barrels per day next month.

That the market rallied only a little over 1% on the announcements, before giving it back, suggests traders don’t view today’s decisions as a game-changer or even unexpected, when it comes to Saudi Arabia. Brent crude continues to trade in the same range, roughly between $72-$77 at this point and only a break of either of these levels will suggest something has fundamentally shifted.

Gold pares losses after a rough couple of months

Gold has struggled in recent weeks against the backdrop of persistent stubborn inflation, resilient economic data, and, as a result, higher interest rate expectations. We’re seeing it bounce back a little over the last couple of sessions after briefly dipping below $1,900 but the trend is still very much against it.

That said, we may be seeing some weakening of momentum around $1,900 which could hint at a corrective move, although a loss of momentum in itself doesn’t mean the price will suddenly reverse. A significant break below $1,900 could see it plunge again, and on improving momentum, but after falling almost 9% since early May, a correction could make sense.

Is the bitcoin consolidation a bullish signal?

Bitcoin is continuing to fluctuate largely between $30,000-$31,000 in a manner that may feel encouraging to the crypto community after such a powerful rally a couple of weeks ago. While it hasn’t managed to capitalize any further, that it hasn’t given back a portion of those gains gives the impression that traders think there’s more to come and that this is merely a period of consolidation amid a bigger move. Time will tell whether that turns out to be the case and news flow may have a big part to play in the outcome but what we’ve seen so far is encouraging.