US Manufacturing shrank again in July but slower than in June. The Institute for Supply Management said its index of factory activity rose to 48.9 in July from 44.8 in the prior month. That was above economists' expectations. A reading below 50 indicates contraction.
The July ISM data is in keeping with a recovery picking up some momentum, even if the overall index has yet to make its way out of the contraction zone (below 50). Earlier, a UK purchasing managers' index showed British manufacturing activity grew last month for the first time since March 2008, while an equivalent survey on the euro zone showed the factory sector edged closer to recovery. Adding to the positive sentiment was data out of China showing a measure of manufacturing rose to a one-year high, powered by domestic spending that helped offset anemic exports.
Among commodity-linked currencies, the Australian dollar, the New Zealand dollar and the Canadian dollar all moved higher. Traders said the Aussie was being supported by expectations that the Reserve Bank of Australia may drop a key reference on monetary policy easing at its meeting on Tuesday while keeping the cash rate unchanged at 3%. Traders continue to think a further rate cut is unlikely, and expect the RBA to be one of the first banks to start tightening rates with a 50 (basis points) hike next March.
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Reuters contributed to this article.
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