The US dollar is trading with a heavier bias to start the month of June. Weaker stocks and firmer bonds has seen the yen rise the most, while sterling’s losses have been extended after an ICM telephone survey showed a small lead for those favoring Brexit.

The Nikkei fell 1.6%, the largest loss since May 2 and snaps a five-day advance. The delay in the sales tax was confirmed. This second delay now puts it out into late 2019. The economic data from Japan was mixed. Capital expenditures in Q1 were stronger than expected (4.2% vs. 2.4%), and this warns of upside risks upside revisions to Q1 GDP (June 8) after it had already surprised to the upside.  

On the other hand, Q2 is off to a soft start. The May manufacturing PMI stands at 47.7 (up from 47.6 in the preliminary estimate), but still off from 48.2 in April.  May’s decline was the fifth consecutive month. The average from Q1 was 50.5.  

The US dollar fell to JPY109.65, after seeing a high near JPY111.45 at the start of the week. The 20-day moving average is at JPY109.40. The greenback has not closed below this average since May 13. Below there is a band of support between JPY109.00 and JPY109.20.  A break of that support signals a move toward JPY108.50.  

The May manufacturing PMIs are the main economic news from Europe. The eurozone PMI was unchanged from the preliminary reading of 51.5, which is off 0.2 from April’s 51.7 reading. The April report matched the average of Q1.  However, on a trend basis, there has been a gradual decline since the beginning of the year, despite small upticks in February and March. 

The main country breakdown shows the loss of momentum is widespread. Germany’s is at 52.1 from 52.4 of the flash reading, but it remains a bright spot within Europe. It is the third monthly increase and stands above the Q1 average of 51.2. France ticked up to 48.4 from the flash’s 48.3.  It is third month below the 50-boom/bust level. Despite the weakness in PMI, which averaged below 50 in Q1, GDP for the Jan-March period was 0.6%, matching its best quarter since 2013.