The US dollar flurried around yesterday after a dismal manufacturing release from the New York Federal Reserve. The survey of general business conditions in the manufacturing sector saw the sharpest one-month downgrade in its 18-years’ worth of records. The June reading marked a fall from 17.8 to -8.6 and also marked the first negative reading since October 2016, with subindices such as employment falling into negative territory along with new orders. The greenback continues to trade on the back foot this morning as news is released that China’s holdings of US Treasuries are at its lowest point in two years, sparking fears that the trade war may begin to move into fixed income markets. Data collected by the US Treasury Department show China’s holdings of US government instruments fell by $7.5bn in April to $1.11trn in April. The data collected is for the period prior to when tensions between Washington and Beijing took another leg higher, suggesting that the dumping of US Treasuries is likely to have escalated in recent months as Chinese officials attempt to maintain their control over the level of the yuan.


Sterling fell a quarter of a percentage point yesterday as politics continued to weigh on the pound despite the dollar softening across the board. GBPUSD now sits at its lowest point since December, if you ignore January’s flash crash, and is at a five-month low against the euro. The news out of yesterday’s session is that Chancellor of the Exchequer, Phillip Hammond, is prepared to quit over Theresa May’s proposed spending plans as she looks to consolidate her legacy in the final month of her tenure. Hammond is supposedly unhappy about May dipping into the no-deal war chest he has built up over the last 18-months with the beleaguered PM suggesting a £27bn spending spree on education over the coming three years. Elsewhere in the Tory leadership race, Rory Stewart is picking up steam while his face is splashed over the majority of UK newspapers this morning. This time around, if the news flow is a barometer by any means, Rory Stewart may find a tailwind and a substantially larger base of support than the previous 19 members from last week. The FT’s running story on the matter this morning is that Rory Stewart’s popularity is putting Home Secretary Sajid Javid’s campaign in real jeopardy. The only known from today’s second round of voting is that at least one more contender will be removed from the race, while the results are expected at around 18:00 BST today.


The single currency feigned a move upwards midday but after a flurry of volatility retreated somewhat to sit marginally higher against USD on the day. Today the European Central Bank’s annual conference in the picturesque Portuguese city of Sintra commences at full force with several panel discussions on monetary policy featuring prominent central bankers throughout the day. German ZEW Economic Sentiment meanwhile will be due at 10:00 BST, together with Eurozone final consumer inflation figures for the month of May.


CAD held firm yesterday after a washout on Friday’s oil markets swept the legs away from under the loonie earlier. Bank of Canada’s Deputy Governor Lawrence Schembri’s speech on flexible exchange rates and price stability failed to move the needle on loonie crosses as he revealed no hints about the potential direction of monetary policy. Today sees Manufacturing Sales at 13:30 BST as the most important data release, before the vital CPI and Retail Sales data on Wednesday and Friday respectively.