The DXY Index is trading at 104.1 this morning as the dollar saw its recent rally run out of steam due to a corrective decline in US yields across the spectrum.
Jobless claims came in at 227K, compared to 242K expectations. Although lower than expected, the number of continuing claims is 1897K compared to 1875K expectations.
US PMI data came in, with Composite PMI at 54.4 compared to 53.8 expectations. Services and manufacturing PMIs came in at 55.3 and 54.3 respectively, above expectations.
Key US data to finish off the week is Durable Good Orders and University of Michigan sentiments. Durable Goods Orders are expected to contract by 1.0% in September, after August’s 0.0% print.
Looking ahead, we see two major events fast approaching. Nov. 5 will be the highly anticipated US election results and Nov. 7 will be the next FOMC meeting to decide interest rates.
Although markets are starting to price in a Trump victory, the presidential race is still very close, especially amongst the swing states.
Compared to the US elections, the FOMC meeting results will be a lot easier to predict, with a 90% probability of a 25bps cut next month. Although some FOMC officials have some hesitation, the majority of members will support a cut.
PMI data caused the single currency to dip as low as 1.0772 against the dollar before rising above the 1.08 mark. In today’s session we see trading around 1.0820 as the week wraps up.
Eurozone PMI came in close to expectations with Composite PMI rising by 0.1 and matching expectations of 49.7. There was a rise in Manufacturing PMI, coming in at 45.9, beating 45.1 expectations. Services were lower than expectations by 0.3, coming in at 51.2.
With manufacturing business activity, especially in Germany, struggling in contraction territory, and Composite PMI hovering below 50.0, this will add to the case for further central bank easing.
Cable climbed from 1.2910 to 1.2986 during yesterday’s session, following UK PMI data news. This morning the pair is trading around 1.2970.
UK Composite PMI fell from 52.6 to 51.7, lower than 52.5 expectations. Services PMI fell from 52.4 to 51.8. Manufacturing PMI fell from 51.5 to 50.3.
With business activity in the private sector expanding at a softening pace, the BoE is likely to take a more aggressive stance towards lowering interest rates if the current slowdown continues.
