The dollar remained generally on the defensive during Tuesday, unable to recoup losses seen in the New York session on Monday with bulls frustrated yet again over the inability to make headway, but it did find defenders at lower levels. The Chinese PMI manufacturing data was slightly stronger than expected which helped underpin risk conditions on hopes that the economy could be stabilising.
The Reserve Bank of Australia left interest rates on hold at 2.50% following the latest policy meeting. The net statement was slightly more hawkish than expected with frustration that the Australian dollar had not fallen further and some resignation over its near-term strength. In this context, AUD/USD pushed higher to above 0.9450 and testing the resilience of longer-term bears.
There were mixed Euro-zone PMI manufacturing releases with a stronger reading for Spain while conditions in Italy were weaker and there was a small net deterioration in the final Euro-zone reading as a whole at 51.8 from the 51.9 flash reading. There was also a weaker than expected German unemployment reading.
The Euro was still broadly resilient following the data with the US currency unable to gain any significant traction. There were reports of barrier interest in the 1.3700 area with suggestions of a double no-touch 1.3500-1.3700 option position being defended. EUR/USD rallied to just below this level before consolidating with little in the way of significant pullbacks.
The UK PMI manufacturing data was stronger than expected at 57.5 for June from 57.0 previously and the highest reading for seven months which helped underpin Sterling as GBP/USD continued to test the strongest levels since the fourth quarter of 2008. Bearish speculative positions were again flushed out with EUR/GBP back below 0.8000.
The US ISM manufacturing data was keenly anticipated with nerves increased by the double correction seen following last months report. The headline index was slightly weaker than expected at 55.3 from 55.4. The orders component was strong at 58.9 from 56.9 while employment was unchanged from last month at 52.8. Despite these encouraging elements, the data as a whole did little to underpin dollar sentiment with markets still waiting for evidence of a more hawkish tone from core members of the FOMC.
EUR/USD briefly spiked towards 1.3700 before being rebuffed by sellers again as GBP/USD consolidated near 1.7150. USD/JPY struggled to hold above 101.50 following the US data release as AUD/USD broke higher again to the 0.9490 area.