Currency markets were particularly affected, as the US Dollar spiked in strength after the release of preliminary Purchasing Managers’ Index (PMI) data. Even the game GBP/USD, which enjoyed a strong bull run to start the day, reversed course and returned to rest on the 1.2920 area. The sharper US Dollar tone led to a significant driver behind this currency pivot.
Together with the PMI readings, one of the most important economic indicators, released last week, they sent waves of panic through the financial markets. These early numbers painted a rosy picture for the US economy to stiffen the US Dollar. The GBP/USD gained sharply at first but instantly pared a few of its positive factors. It eventually took on a more bearish tone, finding some balance around the 1.2920 area.
The currency traders stayed glued to these developments as the sudden firmer US Dollar was sending the GBP/USD under intense pressure. Readings at this level are a key gauge of economic growth and direction, often used to guide investor expectation. As expected, the recent release painted an upbeat picture of the United States’ economic landscape. In response, the dollar greatly strengthened against other currencies.
Market analysts were quick to point out that the firmer US Dollar was a direct result of the upbeat PMI release. The GBP/USD pair went on the uptick at first with strong bullish momentum. It soon backtracked and returned to pre-pandemic crime levels. Do you blame them, as this dramatic currency market reaction shows how fickle and sensitive currency markets have become to economic data surprises.