The US dollar was mixed to close out the trading week, with investors digesting the Federal Reserve’s policy decision and new economic data. The greenback has struggled to etch out a concrete direction this week, but higher Treasury yields and tight monetary policy could forge a new path for the buck.

The US economy is showing signs of slowing down after the S&P Global released a trio of purchasing managers’ indexes (PMIs). The manufacturing PMI edged up to 48.9 in September, up from 47.9 in August, slightly higher than the market estimate of 48 — anything below 50 indicates contraction. The services PMI slowed to 50.2, down from 50.5, and below the consensus forecast of 50.6. The composite PMI dipped from 50.2 to 50.1.

This comes after the Conference Board’s Leading Economic Index (LEI) fell 0.4% again in August, further signaling that a recession is on the horizon. This was unchanged from the 0.4% drop in July.

“With August’s decline, the US Leading Economic Index has now fallen for nearly a year and a half straight, indicating the economy is heading into a challenging growth period and possible recession over the next year,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “The leading index continued to be negatively impacted in August by weak new orders, deteriorating consumer expectations of business conditions, high interest rates, and tight credit conditions. All these factors suggest that going forward economic activity probably will decelerate and experience a brief but mild contraction. The Conference Board forecasts real GDP will grow by 2.2 percent in 2023, and then fall to 0.8 percent in 2024.”

In addition, the Federal Reserve Bank of Philadelphia’s Manufacturing crashed to 13.5 in September, down from 12 in August. This was worse than economists’ expectations of -0.7

Meanwhile, initial jobless claims slowed to 201,000 for the week ending September 16, down from 221,000 in the previous week. The four-week average dropped to 217,000, while continuing jobless claims eased to 1.662 million.

On Wednesday, the Federal Reserve left the policy rate unchanged at a target rate of 5.25% and 5.5%. But the Federal Open Market Committee’s (FOMC) Summary of Economic Projections (SEP) suggests one more rate hike before the year is over and forecast rate cuts in late 2024 by just 50 basis points.

US Treasury yields were mostly down on Friday, with the benchmark ten-year yield falling 3.6 basis points to 4.444%. The two-year yield slipped 5.5 basis points to 5.093%, while the 30-year bond fell 1.2 basis points to 4.54%.

The US Dollar Index (DXY), a measurement of the greenback against a basket of currencies, jumped 0.06% to 105.43, from an opening of 105.38. The index is flat on the week, but it is up nearly 2% year-to-date.

The USD/CAD currency pair declined 0.29% to 1.3446, from an opening of 1.3485, at 14:30 GMT on Friday. The EUR/USD edged up 0.03% to 1.0666, from an opening of 1.0663.