Eurozone composite PMI falls to 47.5, UK to 48.5. Dollar recovers, yen straddles JPY159. Nvidia earnings lift Asia. US data deluge next.
Preliminary May PMIs across the eurozone, the UK, and Australia confirm the economic drag from the ongoing war, with composite readings slipping below the 50 boom/bust threshold. The dollar recovered from yesterday's losses, trading with a firmer bias, while benchmark 10-year yields fell sharply. The data reinforce a stagflationary mix that keeps central banks cautious on rate cuts and supports the greenback's bid.
The flash PMI releases painted a consistent picture of cooling activity and elevated price pressures. The eurozone composite fell to 47.5 from 48.8, remaining below the 50 threshold for a second consecutive month after staying above it for all of last year. Services contracted sharply to 46.4, while manufacturing ticked down to 51.4.
The UK saw a similar deterioration. The services PMI plunged to 47.9 from 52.7, driving the composite to 48.5 from 52.6. That follows a weak employment report earlier in the week and undermines the Q1 GDP print of 0.6% growth, which had matched the strongest since Q1 2024.
Australia's composite fell to 47.8 (from 50.4), with services at 47.7 and manufacturing at 50.2. The April employment report added to the bearish tone: the unemployment rate jumped to 4.5% from 4.3%, and the economy lost 18.6k jobs against a consensus forecast for a gain of 15k.
India held up best, with the composite at 58.1 (services edged up to 58.9). Japan's composite slowed to 51.1 from 52.2, remaining above 50.
The dollar recovered from yesterday's North American afternoon losses, trading with a firmer bias across G10. The USD/JPY pair remained pinned near the JPY159 level despite a brief dip to JPY158.60 after US 10-year yields dropped 8.5 bp yesterday – the largest single-day decline since February 5. Japanese authorities have not escalated their rhetoric, and the dollar traded in a tight JPY158.80–JPY159.10 range.
The euro tested the lower end of the support zone identified at $1.1580–$1.1600 before recovering to $1.1645 after President Trump indicated negotiations with Iran were in the final stages. That headline sent oil tumbling and briefly boosted risk appetite. The euro consolidated mostly between $1.1620 and $1.1640 in the North American afternoon.
Sterling posted an outside up day yesterday and reached a new four-day high near $1.3465. The session low around $1.3415 was recovered before the soft PMI, and the high stalled near $1.3455 where options for about GBP935 mln expire today. A move above the 50% retracement of the losses since the May 1 high at $1.3480 could target the $1.3510–$1.3520 area.
The Canadian dollar was the only G10 currency that did not rise against the greenback yesterday. The USD reached nearly CAD1.3780, a new high since April 15, and has traded above CAD1.3760 for four consecutive sessions – roughly the 50% retracement of the sell-off from the year's high near CAD1.3965. Yet it has not settled above that level. Chart resistance sits at CAD1.3800–1.3815.
The Australian dollar rebounded almost 0.65% yesterday, leading G10 performers. It rallied to $0.7175 after settling at a one-month low near $0.7105 on Tuesday. Today it is contained within a $0.7100–$0.7160 range. A convincing move above $0.7200 would suggest the downside correction from the March highs is over.
The Mexican peso benefited from a weaker dollar, falling US rates, and risk-on equity flows. The dollar rose to a two-week high near MXN17.43 before reversing to MXN17.26. Moody's cut Mexico's sovereign rating to Baa3, matching Fitch's earlier move, the market showed little reaction. The dollar trades between MXN17.29 and MXN17.3650.
The offshore yuan remained in a CNH6.7960–6.8215 range. The PBOC set the dollar's reference rate at a new multiyear low of CNY6.8349.
The Reserve Bank of India intervened aggressively, including reportedly in the offshore market, to support the rupee. The dollar gapped lower after posting a record high near INR96.9650 yesterday, falling to INR96.04. More rate hike threats could extend the short squeeze.
Benchmark 10-year yields fell sharply yesterday in the European afternoon, with most markets losing 9 to 13 bp. The UK, Italy, and Greece led with 13–14 bp declines. The US 10-year yield dropped about 9 bp to 4.57%, its largest single-day fall since early February. Asia-Pacific bonds caught up today, and European yields edged lower again, with the 10-year Gilt yield down about 4 bp.
This yield compression signals a shift in rate expectations. The weak PMIs and the disappointing UK employment data reduce the urgency for further tightening from the Bank of England and the ECB. In the US, the Atlanta Fed's GDPNow still tracks 4% annualized growth for Q2, the preliminary PMI and the Philadelphia Fed survey today could challenge that outlook.
The favorable response to Nvidia's earnings helped arrest a four-day slide in the MSCI Asia Pacific Index. The Kospi rallied nearly 8.5%, Taiwan's Taiex jumped almost 3.4%, and Japan's Nikkei gained a little more than 3%. Europe's Stoxx 600 is rising for a fourth consecutive session, which would match the longest advance of the year. US index futures are narrowly mixed.
According to AlphaScala's proprietary model, NVDA (NVIDIA Corporation) carries an Alpha Score of 66/100 (Moderate) with a current price of $223.47, up 1.30% today. The score reflects resilient demand for AI chips, valuation multiples remain elevated relative to historical averages.
July WTI tumbled from almost $103 to $97 in the first hour after the Iran headline, then consolidated choppily for the rest of the session. It settled at its lowest in four sessions. Today it is testing the lower end of yesterday's range, with the 20-day moving average near $97. It has not settled below that level for a month.
Gold made a marginal new low since late March near $4475 before recovering to $4553. It reached $4571 today before being turned back. Resistance lies at $4590–$4600; a break above that zone would boost confidence that a low is in place. Silver held above Tuesday's low near $73.10 and settled about 3.25% higher, reaching $77 edging lower on the day.
In a 75-minute window today, the US releases weekly jobless claims, April housing starts and permits, the May Philadelphia Fed business survey, and the preliminary composite PMI. Housing starts are expected to slow after jumping 10.8% in March. The Philadelphia Fed survey and composite PMI may not capture the re-acceleration implied by the Atlanta Fed's GDPNow, which sees the economy tracking 4% annualized growth – the fastest since Q4 2021.
Mexico reports March retail sales, expected to rebound 0.5% after a 0.9% drop in February. The eurozone's March current account surplus of €14.86 bln brings Q1 to €80.6 bln, down from €117 bln in Q1 2024 – a trend that bears watching for structural demand for euros.
The Reserve Bank of India intervened aggressively today, including reportedly in the offshore market, to support the rupee. The dollar gapped lower after posting a record high near INR96.9650 yesterday, falling to INR96.04. More rate hike threats could extend the short squeeze.
The soft PMI data across developed economies, combined with the dollar's resilience and the yield collapse, create a challenging environment for carry trades and risk-sensitive currencies. The next catalyst is the US data barrage this afternoon, which will test whether the war's economic drag is already priced into the dollar's bid or whether further downside in yields can drive a breakout in the yen and gold.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.