USD, JPY, EUR, AUD flows: USD still firm, PMIs in focus

Preliminary PMIs for May are the main data focus today, although as usual shifts in sentiment around the US/Iran deal could influence sentiment. The PMIs in the US and Eurozone are expected to be fairly stable, while the UK services PMI is expected to dip a little. The Japanese services PMI fell back a little overnight, and the risks may be on the downside for services PMIs elsewhere as the impact of the higher oil price starts to kick in. The Japanese manufacturing PMI dipped slightly but remains at a high level, perhaps finally getting some boost from the very weak currency.

For FX in general, the underlying USD tone remains firm, and is likely to remain so if we see any PMI dip, with the market tending to take more notice of the European PMIs than the US. However, strong Japanese trade data overnight is mildly JPY supportive, and with USD/JPY’s 7 consecutive days of gains having broken yesterday, there may be some scope for a recovery. The AUD slipped after weak employment data overnight and may be vulnerable to further losses. It has reversed momentum having topped out below 0.73 at the beginning of the month.