US Dollar Index ( DXY ) volatility is stunning today, currently trades around 99.20, after as low as almost two-week lows near 99.01. A string of disappointing manufacturing data has sent the currency tumbling. Accordingly, investors are reconsidering existing investments. While in November, the ISM Manufacturing Purchasing Managers Index (PMI) slid down to 48.2. This drop from October’s 48.7 was deeper than the forecast prediction of 48.6 as well. This change underscores still-alive challenges to US manufacturing, serving as one of the Dollar’s main supports against other currencies.
The most recent ISM Manufacturing PMI report painted an interesting, even dichotomous portrait of the industry. Of particular concern is the Employment Index, which fell to 44.0 from last month’s 46.0 reading, signaling a clear contraction for manufacturing employment. The New Orders Index felt the brunt of that, dropping from 49.4 to 47.4. This sharp decline represents a cooling of demand for manufactured goods. Conversely, the Prices Paid Index was a shining star in the survey, rising slightly to 58.5 from 58.0, still suggesting expansion in pricing power.
These mixed signals from the US manufacturing sector have prompted market analysts to closely monitor upcoming economic indicators that could further influence the Dollar’s performance. On Tuesday, the Eurozone will be releasing its Core Harmonized Index of Consumer Prices (HICP). Finally, on Wednesday, they’ll release the Composite PMI, Services PMI, and Producer Price Index (PPI). These reports will provide key windows into Eurozone economic health. These data could really move the EUR/USD exchange rate.
Read on for some good news – and bad! Wednesday provides the US with some key releases, including the highly anticipated ADP Employment Change report and the ISM Services PMI. These numbers will be particularly important in setting market expectations ahead of this Friday’s Personal Consumption Expenditure (PCE) inflation release. This is the most important of the five reports, as this is the one the Federal Reserve observes most intently when setting monetary policy.
Market participants are continuing to focus on these economic indicators. At the same time, the EUR/USD pair continues to gather strength, hovering near 1.1631 and enjoying its sixth-straight day of positive movement. The Euro has gained lately on increased optimism for a Eurozone economic recovery. With business activity on the rise, in November, the Eurozone Composite PMI jumped to 52.2 from 51.9, the fourth month of expansion in a row.
The DXY’s decline and the EUR/USD’s upward trajectory reflect broader trends in currency markets influenced by economic data releases and investor sentiment. Traders are looking to the DXY, which tracks the Greenback’s value against six other major currencies, as a benchmark. They aren’t just looking at these economic indicators and resting on their laurels.