USD flows: USD down after weaker S&P PMIs

The USD has been knocked lower by much weaker than expected S&P PMIs, following on from stronger numbers in Europe and Japan. The correlation of these indices with GDP growth is far from perfect, and it will take more than this to convince the market that Europe and Japan are catching up to US growth. But the US data is enough to push US yields lower on the day and soften the USD. European yields have also been dragged lower by the weaker US data, despite the stronger European numbers, so there hasn’t been much movement in US/Europe yield spreads. This ought to mean that there is a bigger impact on USD/JPY than USD/Europe, but so far that hasn’t been the case, partly because equities are benefiting from the lower US yields.