Talking Points:

Aussie, NZ Dollars Rise as Chinese Manufacturing PMI Data Tops Forecasts
Euro May Look Past PMI Data Set, Focus on Commentary from ECB Officials
US Dollar Looking to Home Sales, PMI Data to Reignite Upward Momentum

The Australian and New Zealand Dollars outperformed in overnight trade after data showed Chinese factory-sector activity unexpectedly expanded in June. The HSBC Manufacturing PMI gauge rose to 50.8, topping forecasts calling for a print at 49.7 and crossing above the 50 “boom-bust” level for the first time in six months. China is Australia and New Zealand’s largest trading partner and a growth pickup there bodes well for the two commodity exporters’ cross-border demand prospects.

The preliminary set of June’s Eurozone PMI figures headlines the economic calendar in European hours. Economists are predicting that the region-wide composite index will show manufacturing- and service-sector growth slowed for a second consecutive month, hitting a three-month low. News-flow from the currency bloc has trended lower relative to expectations since late January, opening the door for a downside surprise.

While such an outcome may initially weigh on the Euro, follow-through could prove limited given its relatively limited implications for ECB monetary policy as investors’ focus remains on the fate of a forthcoming asset purchase program. With that in mind, scheduled commentary from ECB Vice President Vitor Constancio and board member Yves Mersch may prove more significant if the two officials opt to comment on the strategy for stimulus expansion and its likely timing.

Later in the day, the spotlight shifts to US news-flow. May’s Existing Home Sales report and June’s Manufacturing PMI print are on tap. The trend in US economic data outcomes marked an important turning point relative to consensus forecasts in early April and has broadly (if unevenly) continued to improve since. More of the same may help engineer a re-evaluation of US Dollar weakness following last week’s FOMC announcement, sending the benchmark unit higher.

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