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The Japanese Yen opened the week mildly lower after the release of the quarterly Tankan
survey. The large manufacturer index turned positive to +4 in Q2 while large non-manufacturing
index improved to +12. That compared to -8 and +6 in Q1, which were notable improvements.
Companies also expect to raise capital spending by 5.5% in the current fiscal year. That's
much stronger than market expectation of a 2.9% rise. The survey showed positive sentiments
among Japanese companies on the weaker yen and steady recovery and they are willing to
invest in expanding operations. Technically, USD/JPY's rally last week confirmed the resumption
of a rebound from 93.78 and the outlook stays positive. But EUR/JPY and GBP/JPY are still
stuck in range for the moment. Upside breakouts in EUR/JPY and GBP/JPY are needed to confirm
weakness in the Japanese currency. Released from China, the official PMI manufacturing
dropped to 50.1 in June, down from May's 50.8. The data suggested virtually no expectation
in the manufacturing sector. The HSBC China PMI manufacturing dropped 48.2, the lowest
in nine months. HSBC China chief economist noted that falling orders and rising inventories
added pressure to manufacturers in June. And, he noted that recent liquidity crunch would
slow expansion of off-balance sheet landing and exacerbate funding conditions for SMEs.
Growth is expected to be slow in the coming months.
Looking ahead, manufacturing data is a major focus today. In the European session, UK PMI
manufacturing will be released and is expected to be unchanged at 51.3 in June. The UK will
also release mortgage approvals and M4. The Swiss will release SVME PMI which is expected
to rise slightly to 52.5 in June. The Eurozone will release PMI manufacturing final, CPI
and unemployment rate. From the US, ISM manufacturing index is expected to rise back to 50.6 in
June. Meanwhile, a number of key events will be featured later this week including ISM
services and the Non Farm Payroll from the US, European Central Bank and Bank of England
rate decision as well as the Reserve Bank of Australia rate decision.