Here's the story on the PMIs so far today:
- UK July flash services PMI 51.5 vs 53.0 expected
- Eurozone July flash services PMI 51.1 vs 51.5 expected
- Germany July flash manufacturing PMI 38.8 vs 41.0 expected
- France July flash services PMI 47.4 vs 48.4 expected
- Japan Jibun preliminary July PMIs: Manufacturing 49.4 (prior 49.8) Services 53.9 (54.0)
- Australia preliminary PMI: Manufacturing 49.6 (prior 48.2) & Services 48.0 (prior 50.3)
The European numbers are poor and that has weighed on the euro and pound so far today. I spoke last week about the opportunity to sell the euro and it's because the economy is weakening and the ECB doesn't need to keep hiking. There is a 99% implied probability they will hike this week built into the market but it's 50/50 for September. If numbers continue to disappoint like this, the ECB is done.
As for the Fed, it's far less clear. Manufacturing is in the midst of a recession but there are some green shoots that it may actually pick up in the year ahead, at least excluding autos (which is a big one to exclude, admittedly). The consensus on the manufacturing side today is 46.2 from 46.3 previously. It would take a fall to something like 44.0 to get the market seriously worried about a deterioration.
The services side is the more-interesting spot because it's not clear where we are. Consumers continue to spend and that might be pandemic savings but it could also be a more-permanent boost from low 30-year fixed mortgage rates and confidence in the economy/jobs that looks sustainable, or even set to improve through year end.
The consensus on the services side is 54.0 from 54.4 previously.
