The Aussie opens the week strongly higher after upside surprise in manufacturing data from China. The HSBC Chinese manufacturing PMI rose to 50.8 in June, back into expansionary region for the first time in six months since December. That's notably stronger than expectation of 49.7. Looking at the details, improvement was seen in most of indices. In particular, new orders rose to 51.8, highest in 15 months, indicating solid domestic and foreign demand. The HSBC noted that "this month's improvement is consistent with data suggesting that the authorities' mini-stimulus are filtering through to the real economy." And, HSBC expected "policymakers to continue their current path of accommodative policy stance until the recovery is sustained." Also released in Asia, Japan manufacturing PMI rose to 51.1. in June. The AUD/USD breaches last week's high of 0.9437 and is heading to 0.9460 resistance next.
In the Eurozone, ECB president Draghi said that interest rates would probably remain low until the end of 2016. He noted that the program to support bank lending to business will continue for four years. Thus, "interest rates will remain low over a longer period". Regarding the economy, he said recovery is still "weak and unevenly distributed across the euro area". And he warned that "accidents could happen in the global economy that can quickly change the situation." Meanwhile, regarding quantitative easing, he said that "can include not only government bonds, but also private sector loans", and ECB will discuss that "when the time comes".
The BoE's new chief economist Haldane said last week that the "new normal" of interest rates won't be about the level before the crisis. And, "it is going to be closer perhaps to that 2-3% range." For the moment, he thought "there aren't signs of strong inflationary pressures, there aren't any signs of strong wage pressures, which is why we are in no rush and when the rate rises eventually come they can afford to be gradual."
PMIs will be the main focus in European session. French PMI manufacturing dropped to 47.8 in June while services PMI dropped to 48.2. Both were below expectation. Germany and Eurozone will release PMI data. US will release existing home sales.