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US Dollar Mixed As Manufacturing Index Has Worst Reading in a Decade

October 1, 2019 at 16:03 by Andrew Moran

A rolled $100 note with many $100 notes on the backgroundThe US dollar is mixed on Tuesday after a new manufacturing survey had its worst reading in more than a decade, sending jitters throughout financial markets. Will this fan the flames of a recession and ultimately hurt the greenback?

The Institute for Supply Management (ISM)’s manufacturing purchasing managers’ index (PMI) came in at 47.8% in September, the lowest reading since June 2009 – anything below 50% indicates a contraction. This represents the second straight month of contraction; the industry contracted for the first time in three years in August. The sector had enjoyed 35 consecutive months of expansion.

Further ISM data found that the new export orders index was just 41%, which is also down from 43.3% in August and accounts for the lowest figure since March 2009. The ISM employment measure for manufacturing suffered its worst figure since January 2016, driven by a paucity of demand amid the US-China trade war.

Across the board, backlog, new orders, raw materials inventories, and exports and imports fell.

President Donald Trump blamed the disappointing manufacturing numbers on the Federal Reserve for keeping interest rates too high for too long and allowing the dollar to its best level in three years.

As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!

Meanwhile, ISM’s non-manufacturing data will be released on Thursday, and analysts are anticipating declines from August.

On Friday, the US government will publish the September jobs report and the consensus suggests a gain of 149,000 jobs, an increase from the 130,000 in August.

So, what are the chances that the Fed cuts rates at its next Federal Open Market Committee (FOMC) meeting later this month? According to the CME Group FedWatch tool, about two-thirds of the market expect a quarter-point cut to a target range of 1.50% and 1.75%.

The USD/CAD currency pair tumbled 0.05% to 1.3235, from an opening of 1.3243, at 15:55 GMT on Tuesday. The EUR/USD rose 0.31% to 1.0934, from an opening of 1.0899.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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