US Composite PMI Revised to 51.9, Easing Slightly from Flash

The S&P Global US composite purchasing managers index settled at 51.9 in June, down from a preliminary reading of 52.2 and up from 51.5 in May, the data released Tuesday showed. The services component drove the headline, with new orders and business confidence improving through the month. Export demand weakened, and firms continued to cut headcount. Price pressures eased a touch but stayed elevated.

Taken together, the numbers describe an economy still growing but at a pace a bit slower than the flash estimate had suggested. The composite has held above the 50 expansion mark for two months now, after slipping to 50.9 in April. The downward revision to the June print was concentrated in the services side. Manufacturing remained in contraction territory, the report noted.

For the dollar, the data muddies the near-term narrative. A faster expansion would have reinforced the case for the Federal Reserve to hold rates higher for longer. The 0.3-point revision, combined with the weak export and jobs readings, gives the other side a bit more weight. Traders trimmed rate-hike bets slightly after the release, two dealers said. The dollar index slipped 0.1% on the session.

The yield curve flattened a couple of basis points as two-year yields edged lower. The market is now pricing in roughly one more quarter-point hike this year, down from 1.2 hikes before the flash data. The 10-year yield held near 3.85%.

In the currency market, the euro and sterling both gained a few tenths of a percent against the dollar. The move was modest – the kind of repositioning that happens when a data point comes in weaker than the early read, not the kind that shifts trend views. The next catalyst for the dollar is Friday's nonfarm payrolls report.