USD flows: USD up on PMIs

The USD has risen after the US PMIs, particularly against the JPY, although the composite index is only marginally above consensus (and down on the month) and the manufacturing index has fallen more than expected. The reaction probably reflects the fact that the data is relatively strong compared to the European, particularly the Eurozone data released earlier. But the numbers are unlikely to change the Fed’s view of the economy and the likely policy trajectory, so we doubt there will be any extension of the initial move, especially since the PMI data is not a particularly reliable indicator.