Services PMI
On Friday, important readings were missing, so investors closely followed the release of PMI indices for services. Many observers consider it the less important of the two main business cycle indicators. It is interesting that services employ several times more workers than industry in Western economies. The result for the euro area turned out better than expected.
It was expected to be 48.9 points, but 49.4 points were received. The result was therefore not bad, but still below the 50-point threshold that conventionally separates positive from negative responses.
We then learned about data from the United Kingdom. Those also turned out better than forecasts, but by only 0.1 points. The index was 48.8 points, reaching its lowest level in years.
Dollar on Independence Day
On Friday, Americans celebrated Independence Day. Theoretically it falls on July 4, but because this year it was a weekend, the holiday was moved to the nearest business day. That is why on Friday we did not receive U.S. macroeconomic data. The dollar market was of course not closed simply because American investors were absent.
Liquidity was, however, noticeably lower. At the start of the day the dollar lost a bit against the euro. This move coincided with good business cycle readings from Europe. Later in the day the U.S. currency, however, recovered most of those losses. As you can see, investors preferred to start the weekend with dollars in their portfolios.
What about the agreement in the Persian Gulf?
Part of the dollar's pre‑weekend strengthening probably stemmed from the very slow pace of peace negotiations. The 60‑day peace memorandum is in effect, but progress is not obvious. From time to time technical talks are held by intermediaries, but this does not speed up the process. The world welcomed the reopening of the Strait of Hormuz with relief, but difficult issues remain on the table.
It is unclear what will happen next with Iran's nuclear program, U.S. sanctions, Iran's control methods, and regional stabilization after recent events. Only oil traders are optimistic, believing that since the strait is navigable, most risks disappear.
Last week, the Brent crude barrel briefly fell below the $70 barrier. We therefore found ourselves at levels that appear in the market not only during crisis periods.
Today, in the macroeconomic calendar, there are no important readings.
