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The Most the Dollar Can Hope for on Turn Around Tuesday is Consolidation / by Marc Chandler / August 1, 2017

After taking a step lower in the North American session yesterday, the dollar is consolidating today.  The euro is holding above $1.18, and the dollar held JPY110.00.  Global equities are mostly higher, while bonds are mixed.  Asia-Pacific yields were mostly higher, while European rates are a little lower.  The US 10-year yield is flat just below 2.30%.
The monthly cycle of high frequency data begins with the PMI data.  The Caixin manufacturing PMI for China unexpectedly rebounded to 51.1 from 50.4 in June.  Recall that on Monday, the official manufacturing PMI slipped to 51.4 from 51.7.  There is no big takeaway.  China’s economy was stronger than expected in H1 and many expect a modest slowing in H2.  A combination of capital controls and a weaker US dollar has allowed China to rebuild reserves in recent months.  Reserves are expected to have risen in July for the sixth consecutive month.  The reserve data are expected next week.
 The EMU’s manufacturing PMI slipped to 56.6 from the flash reading of 56.8, showing a somewhat larger pullback from June’s 57.4.  It is the first decline since last August.  It puts it at its lowest level since March.  It is warning that the economy may be stabilizing after it was reported earlier today that the region expanded by 0.6% in Q2, lifting the year-over-year rate to 2.1% from 1.9%.  Growth in Q1 was revised lower to 0.5% from 0.6%.    Of note, especially when thinking about the ECB’s deliberations, the manufacturing PMI found the lowest input prices in nine months, and the lowest prices paid since the start of the year.


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