Forex News

Commerzbank’s Tatha Ghose analyses Turkey’s June trade figures, highlighting a 26.2% year-on-year widening of the trade deficit to USD 10.4 billion. While exports and imports both rebounded after May’s holiday distortions, imports are running stronger than exports. Ghose stresses that the trade deficit remains around 6% of GDP, underscoring persistent balance of payments vulnerabilities.

Deficit, imports and balance of payments

"Turkey’s latest trade data for June showed the external trade deficit widening by 26.2%y/y to USD 10.4bn. Exports rose by 21.7%y/y to US$24.9bn, while imports increased slightly faster, up by 23.0%y/y to US$35.3bn. On the surface, this appeared to confirm a strong month for trade, although at the cost of some worsening of the trade balance."

"But these headline figures are misleading. They partly reflect the reversal of holiday-related distortions in May, and the year-on-year comparison says little about the latest incremental trend. On a seasonally-adjusted basis, both exports and imports recovered after dipping in May (as the situation slightly stabilised in the Middle East). This means that the June data should not be read as a simple story of recovering trade volumes; if anything imports are running stronger than exports."

"The composition of imports gives the same message. Intermediate goods imports were up by 30.0%y/y and capital goods imports by 19.6%y/y, while consumer goods imports were lower by 1.2%y/y. This supports the idea of risk aversion, with consumer confidence deteriorating while industry wanted to stock up rapidly on raw materials."

"The data were not surprising, but they highlight the adverse condition of Turkey’s balance of payments despite years of attempted monetary tightening to try and correct macroeconomic imbalances such as the current-account gap."

"These monthly details aside, overall, it is not a comforting picture: as far as the trade deficit is concerned, it has been more or less flat at around 6% of GDP in recent months. The deficit has not been improving in any convincing underlying sense."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Geoff Yu at BNY sees Brazil and Mexico operating in a more comfortable policy environment after the Fed decision, with anchored United States (US) front-end yields supporting emerging-market duration. Yu argues that Latin American sovereign debt offers better risk-reward than FX, given crowded positioning and limited upside, while softer U.S. real rates and Dollar weakness improve the inflation outlook through the import channel for regional assets.

Duration opportunity in Latam markets

"Central bank decisions in Brazil and Mexico will likely take place in a slightly more comfortable policy environment due to market reaction to the Fed decision. Front-end US yields are better anchored, and the breakout in US breakeven rates have significantly undermined the case for US real yields, which matters greatly for EM duration."

"Asset selection remains challenging for the region. Contrary to our expectations, the global carry trade has failed to make much headway amid cross-asset volatility and challenging geopolitics."

"The fall in dollar front-end rates has improved risk-reward, but we see more potential in sovereign debt. Latin American paper performed poorly through end-June and early July, leading to clear rebalancing potential toward month end."

"With the decline in US real rates and dollar softness, the inflation outlook is set to improve further through the import channel, and the region is less exposed to global supply stress in any case."

"Lower hedge ratios than envisaged is a good way to pick up some FX exposure in the meantime."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Business activity in the US manufacturing sector expanded at an accelerating pace in July, with the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) rising to 55.6 from 53.3 in June. This reading came in better than the market expectation of 54.

Other details of the publication showed that the sector's payrolls grew in July, with the Employment Index climbing to 52.8 from 49.7. In this period, the Prices Paid Index, the survey's inflation component, edged lower to 71.1 from 73 but came in above the market forecast of 70.3.

Assessing the report's findings, “In July, US manufacturing activity remained in expansion territory, growing at its fastest rate in more than four years," noted Susan Spence, MBA, Chair of the Institute for Supply Management Manufacturing Business Survey Committee.

"Of the five subindexes that make up the PMI, four grew faster compared to the previous month; the exception was the Inventories Index, which was down just 0.2 percentage point," Spence added.

Market reaction to US ISM Manufacturing PMI data

The US Dollar (USD) Index edged slightly higher with the immediate reaction to the PMI report and was last seen trading flat on the day at 99.82.

This section below was published as a preview of the US ISM Manufacturing PMI report for July.

• The US ISM Manufacturing PMI is seen improving to 54 in July from 53.3 in June.
• The ISM Prices Paid component is expected to have eased for the third consecutive month. 
• The US Dollar trades at seven-week lows against the Euro, weighed by a positive risk sentiment.

Investors are attentive to the US Institute for Supply Management (ISM) on Monday, as it releases July’s Manufacturing Purchasing Managers Index (PMI). This is one of the most closely followed indicators of business activity in the US manufacturing sector, considered a key indicator for economic growth.

The market consensus anticipates an improvement to 54 in the headline indicator, from the 53.3 reading seen in June. If these figures are confirmed, they would match May’s reading, which was the strongest performance of the last four years, in an index showing expansion at levels above 50 and contraction otherwise.

Apart from that, the US ISM Prices Paid component is expected to have eased to 70.3, from 73 in June and 82.1 in May. This is the lowest inflation reading since the war between the US and Iran started, back in February, but still significantly above the 60 average in the six months preceding the war.

What to expect from the US ISM Manufacturing PMI report?

If the market consensus is met, it will confirm the resilience of the US manufacturing sector amid uncertainty surrounding the conflict in the Middle East and high energy prices stemming from it.

These figures are likely to revive the rhetoric of US economic exceptionalism and ease concerns about the slowdown of the second quarter’s US Gross Domestic Product (GDP) released last week. The market, however, will be very attentive to the Employment sub-index for a more complete view.

The US ISM Manufacturing Employment Index has been improving in the last two readings, but it has remained within contractionary levels for most of the last four years. In that sense, a strong PMI release, coupled with an expansion in employment and with inflation at relatively high levels, is likely to improve investors’ confidence about the US economy and strengthen the case for some Federal Reserve (Fed) monetary tightening this year, providing some support to the US Dollar.

The positive impact on the Greenback, however, is likely to be limited. The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, is languishing at seven-week lows amid a mix of risk-appetite triggered by the pause in hostilities in Iran and the sharp USD/JPY reversal following an exceptional US-Japan coordinated FX intervention to shore up the Japanese Yen.

When will the US ISM Manufacturing PMI report be released, and how could it affect EUR/USD?

The US ISM Manufacturing PMI report is scheduled for release at 14:00 GMT on Monday.

The Euro (EUR) consolidates gains on Monday, trading at the 1.1525 area against the US Dollar at the time of writing, standing at its highest levels since mid-June. In that sense, positive data might put a lid on Euro appreciation, but it is unlikely to reverse the current bullish trend unless the risk mood changes substantially

The technical picture shows a modest bullish near-term bias, with the 4-hour Relative Strength Index (14) hovering around 64, showing a positive but not yet overbought momentum, while the Moving Average Convergence Divergence (MACD) indicator remains in positive territory.

Upside attempts have been capped at the 1.1550 area on Monday. Further up, the June 14 and 17 highs, around 1.1620, and the May 29 high, at 1.1685, are likely to test bulls. On the downside, previous resistance around 1.1475 (July 15, 16 highs) has now turned support. If that level gives up, the next targets are the July 29 lows around 1.1375 and the late June lows at 1.1325.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

DBS Group Research economist Ma Tieying notes Taiwan’s 2Q GDP growth slowed to 12.9% year-on-year from 14.5% in 1Q, but remained solid on a quarterly basis. The report highlights narrowing divergence between exports and domestic demand, upside risks to 2026–2027 growth forecasts, expectations for a central bank rate hike, and ongoing pressures in Taiwan’s equities, currency and bond markets.

GDP, rates and market pressures

"According to the preliminary estimate, GDP growth slowed to 12.9% yoy in 2Q, from the 1Q peak of 14.5%. On a QoQ saar basis, growth remained solid at 9.9%, compared with 6.9% in 1Q."

"As a result, net exports contributed 5.8ppt to headline GDP growth, while domestic demand contributed 7.1ppt. This marked the first time in five quarters that domestic demand made a larger contribution than net exports."

"We see some upside risks to our 2026 and 2027 GDP growth forecasts of 9.4% and 4.5%, respectively, although we are maintaining them for now. We continue to expect AI-driven super growth to transition toward a more normalized pace from 2H26 through 2027."

"The GDP data, both in terms of growth momentum and composition, should provide sufficient confidence for the central bank to hike rates in 2H26. CPI inflation is expected to remain in the 2-2.5% yoy range through 2H26, driven by a rebound in oil prices amid renewed Middle East tensions and volatile food prices under El Niño conditions. We continue to expect a 12.5bp rate hike in 4Q, bringing the policy discount rate to 2.125%."

"In financial markets, pressures from the stock market correction, capital outflows, and tighter liquidity conditions remain. The TAIEX has declined 10% from its late-June peak, driven by the global semiconductor stock sell-off and, in particular, heightened volatility in the KOSPI. Foreign net selling of the TAIEX reached USD23bn in July."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

UOB’s Ho Woei Chen notes that Hong Kong’s Gross Domestic Product (GDP) growth slowed to 4.3% year-on-year in 2Q26, with a 0.6% quarterly contraction after a strong start to 2026. Goods exports remain robust, but consumption and investment growth have moderated. The economist highlights downside risks from tighter Mainland capital controls and geopolitical uncertainties, while maintaining GDP forecasts of 3.9% for 2026 and 2.4% for 2027.

Momentum slows after strong first quarter

"Hong Kong’s GDP growth slowed more than expected to 4.3% y/y in 2Q26 from 5.9% y/y in 1Q26 (Bloomberg est: 4.9%, UOB est: 4.4%). On a seasonally adjusted q/q basis, GDP contracted 0.6%, reversing from the strong 2.9% expansion in 1Q26 and marking the first quarterly decline since 4Q22. The softer outturn suggests that economic momentum moderated after a robust start to the year."

"Electronics products such as semiconductors, computer parts, processors and telecom & ICT equipment made up 57% of Hong Kong’s exports in the first 5 months of this year. The city remains the gateway for the Mainland’s high-tech goods trade despite its small industrial base (manufacturing accounts for less than 1% of GDP). The ongoing AI-related global investment cycle is expected to provide continued support for Hong Kong’s export performance through the remainder of 2026."

"Domestic consumption has remained relatively resilient. Retail sales by value recorded a 13th consecutive month of growth in May, supported primarily by stronger demand for consumer durables, including electronics, jewelry, and watches. Consumer spending has been underpinned by improving sentiment and a recovery in tourism, with visitor arrivals rising 13.0% y/y in 1H26."

"The residential property market continued to strengthen. Home prices increased for a 13th consecutive month in Jun, rising 0.3% m/m and 12.7% y/y. In 1H26, prices gained 7.9%, more than double the 3.6% increase recorded for the whole of 2025, reflecting an accelerating recovery in housing market."

"Hong Kong's economy expanded by an average of 5.1% y/y in 1H26. However, growth is expected to moderate further in 2H26 as base effects become less favourable. We therefore maintain our 2026 GDP growth forecast at 3.9%, which remains above the government's official forecast range of 2.5%-3.5%. We also keep our 2027 GDP growth forecast at 2.4%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)