The US Dollar faced a retreat on Monday as market optimism increased amid a potential truce in the ongoing conflict in Ukraine. GBP/USD defended minor bids near 1.2600 during the European session, while EUR/USD experienced pressure, dropping below the 1.0400 level. Meanwhile, all eyes are on the upcoming ISM Manufacturing PMI report, scheduled for release at 15:00 GMT on Monday. Experts anticipate a slight drop in February's PMI to 50.8, just below January's reading of 50.9, indicating a potential deceleration in the manufacturing sector's expansion.
The Relative Strength Index (RSI) dropped to approximately 47, suggesting an increase in bearish sentiment. Simultaneously, the Average Directional Index (ADX) fell below 13, indicating a weakening trend. These indicators reflect the market's current volatility and the US Dollar's vulnerability as investors shift toward riskier assets, spurred by renewed market confidence.
The GBP/USD pair managed to hold ground near 1.2600 during the European session on Monday. This defensive stance comes as the US Dollar weakens amidst growing risk appetite among investors. The potential for a resolution in the Ukraine conflict has added to market optimism, prompting a shift away from safe-haven currencies like the USD.
Conversely, EUR/USD experienced downward pressure, breaking below the key level of 1.0400. The pair faces resistance at the 2025 high of 1.0532, recorded on January 27. Despite these challenges, investors remain cautiously optimistic about the Euro's prospects as the market awaits further developments and economic indicators.
The forthcoming ISM Manufacturing PMI report is a focal point for market participants, offering insights into the health of the manufacturing sector. Analysts forecast February's PMI at 50.8, slightly below January's figure of 50.9. This minor dip suggests a marginal slowdown in the manufacturing sector's expansion, although it remains in growth territory.
In January, the Employment Index rebounded to 50.3, signaling a return to expansion and offering a positive outlook for labor market conditions within the manufacturing industry. Additionally, the New Orders Index continued its upward trajectory, reflecting an increase in demand as manufacturers receive more orders.
However, rising prices remain a concern, with the Prices Index climbing for the fourth consecutive month in January. This trend highlights the ongoing inflationary pressures within the sector, potentially impacting profit margins and consumer purchasing power.
The Production Index marked a significant milestone by returning to expansion territory for the first time since April 2024. This development underscores the manufacturing sector's resilience and adaptability, even amid challenging economic conditions.
Despite these positive indicators, experts caution that the US ISM Manufacturing PMI might see a slight decline in February. This expectation aligns with broader market trends and economic uncertainties that continue to shape the global financial landscape.