The US dollar is weakening against many of its G10 currency rivals in the middle of the trading week, driven by a mix of economic optimism and bearish data. Although the broader US financial market is rallying midweek, the greenback could not muster up enough support to pare its string of losses. Now that the buck has wiped out most of its losses on the year, are investors no longer frightened?
On Wednesday, ADP data found that the private sector terminated 2.76 million jobs in May, down from the 19.557 million in April. The latest reading found that there were fewer layoffs across all the sectors, potential signaling that the US labor market’s downward trend had peaked and could be clawing back its historic losses.
But the jobs data was the only piece of good news for the US economy.
In April, new orders for US manufactured goods plummeted 13% after an 11% drop in March. This is the sharpest drop in factory orders since the Census Bureau started this series in 1991. The immense decline was led by transportation equipment (-48.3%), followed by primary metals (-14.7%) and fabricated metal products (-12.3%).
The IHS Markit final composite purchasing managers’ index (PMI) reading for May came in at 37.0, up from 27.0 in April – anything below 50 indicates a contraction. The services PMI clocked in at 37.5, up from 267 in the previous month.
The Institute for Supply Management (ISM) released several non-manufacturing readings for May: business activity, new orders, employment, and PMI all continued their contraction. Its non-manufacturing prices were the only measurement that expanded a month ago.
According to the Mortgage Bankers Association (MBA), mortgage applications tumbled 3.9% in the week ending May 29. The 30-year mortgage rate dipped again from 3.42% to 3.37%.
The US Dollar Index, which measures the greenback against a basket of currencies, slumped to a three-month low. The index slipped 0.41% to 97.27, from an opening of 97.57. It has shed 1.8% over the last week, paring its year-to-date gain to below 1%.
In addition to the bearish data, investors might be optimistic over the US economy amid nationwide reopening. During the market turmoil of the last couple of months, traders have been pouring into the dollar for its safe-haven status. But with a bit more certainty in global financial markets, the dollar is taking a breather.
The USD/CAD currency pair slid 0.21% to 1.3491, from an opening of 1.3518, at 19:17 GMT on Wednesday. The EUR/USD climbed 0.66% to 1.1243, from an opening of 1.1172.