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US Dollar Slides As Manufacturing, Weekend Riots Hurt Greenback

June 1, 2020 at 16:24 by Andrew Moran

A rolled $100 note with many $100 notes on the backgroundThe US dollar is sliding against multiple currency rivals to start the trading week. The greenback is extending its downward pattern after continued bearish manufacturing numbers and the weekend riots that swept the nation ostensibly impacted the currency. The buck has already wiped out a lot of it gains, so could this trend continue in June?

On Monday, IHS Markit manufacturing purchasing managers’ index (PMI) came in at 39.8 in May, up from 36.1 in April. This was in line with the median estimate. Manufacturing orders, prices, and employment all rose in May from the previous month.

According to the US Census Bureau, construction spending tumbled 2.9% in April to a seasonally adjusted annualized rate of $1.35 trillion. It was flat in March and was expected to plummet 6.5%. This was the biggest drop in construction spending since October 2018, led by declines in transportation, residential, and commercial. Public outlays also contracted due to diminishing investments in highways, streets, and educational.

The US dollar was further impacted by reports that China has required state-owned businesses to suspend purchases of American pork and soybeans. This has sparked concerns that the US-China phase-one trade agreement could be in jeopardy. Beijing warned that it could stop agricultural imports from the US if Washington takes additional action on Hong Kong.

In January, Chinese officials signed the first-phase deal that includes $50 billion in agricultural purchases in 2020 and 2021. Chinese buyers have been striking several deals for US soybeans over the last month, but they have also been turning to Brazil to meet its rising demand for soy and other staples.

Over the weekend, the US was engulfed in violent protests that saw a lot of public and private property damaged due to the death of George Floyd. What started as peaceful demonstrations metastasized into riots that led to waves of injuries and arrests and potentially billions in property damage. This was a terrible event to occur after millions of businesses had been closed due to the coronavirus lockdown.

The US Dollar Index, which measures the greenback against a basket of currencies, slipped below the 98 mark. The index tumbled 0.41% to 97.94, from an opening of 98.30. Last week, the buck shed nearly 2% and pared its year-to-date gain to below 2%.

The USD/CAD currency pair plummeted 1.3% to 1.3592, from an opening of 1.3773, at 16:07 GMT on Monday. The EUR/USD jumped 0.19% to 1.1125, from an opening of 1.1100.

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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