The US dollar recorded a modest gain against some of its currency counterparts to start the trading week. After exceptional growth in the first half, the buck has struggled to sustain the momentum over the last month, particularly against the loonie. But will disappointing data lift the US dollar again?
The S&P Global Manufacturing Purchasing Managers’ Index (PMI) final reading for July eased to 52.2, slightly under the market forecast of 52.3 – anything above 50 indicates expansion. This represented the lowest factory growth since July 2020.
The monthly print highlighted weaker demand conditions, raw material shortages, and a struggle to hire employees. Moreover, new orders fell, inflows weakened, cost inflation softened, and business expectations tumbled to the lowest level since October 2020.
The Institute of Supply Management (ISM) manufacturing PMI also dipped to 52.8 last month, but it was better than the consensus if 52. Prices tumbled, new orders dropped, and employment levels edged up.
Meanwhile, construction spending dropped 1.1% in June, according to the US Census Bureau. This was the biggest drop since February 2021, driven by lower spending on private and public construction.
Market analysts contend that the greenback is coming under pressure on traders trimming their long dollar positions. Indeed, the dollar has struggled to find a certain direction, seesawing following every data metric.
In addition to data, forex traders will be monitoring central banks and what policy actions they may be taking.
“Markets are now locking horns with central banks in terms of their efforts to aggressively hikes rates to try and rein in inflation, with markets taking an increasingly confident view that central banks will have to abandon their inflation quest due to looming recession risks,” said Marc Ostwald, chief economist at ADM Investor Services.
The US Dollar Index (DXY), a gauge of the greenback against a basket of currencies, fell 0.41% to 105.47, from an opening of 105.90. The index is coming off a weekly loss of about 1%, but it is still up nearly 10% year-to-date.
The US Treasury market was mostly in the red to start the trading week, with the benchmark 10-year yield down 3.5 basis points to 2.605%. The one-year bill dipped 1.8 basis points to 2.956%, while the 30-year bond erased two basis points to 2.96%.
The USD/CAD currency pair rose 0.2% to 1.2821, from an opening of 1.2796, at 14:21 GMT on Monday. The EUR/USD surged 0.35% to 1.0263, from an opening of 1.0221.