Currency volatility should pick up today as US markets reopen after the long Labor Day weekend and data releases take over. The big event of the day is the US ISM manufacturing index. Remember that it has been in contraction territory (i.e. below 50) every month since October 2022, excluding a brief bounce in March of this year. Weakness in the manufacturing sector has been priced in for a while, and we probably need to see a fairly low number to trigger recession alarm bells and drive the dollar materially lower, notes Francesco Pesole, FX strategist at ING.
DXY will remain flat in the 101.50/102.0 range
“Consensus expects a modest improvement in August, from 46.8 to 47.5. One subindex we are monitoring closely is the ISM Prices Paid index, which also saw a rebound this spring but has been subdued in recent months. Consensus expectations are for a decline to 52.0 from 52.9, which should fuel Fed and market conviction about disinflation.”
“Our calculations on the CFTC’s forward speculative positioning data show that the dollar has moved close to a neutral stance, with aggregate net long positions against G10 currencies reported now amounting to just 5% of open interest, as of August 27. That’s down substantially from 16% in early July and 24% in early May. When combining this notion with a Fed assessment that includes a 50bp cut by year-end, the case for another major dollar decline needs to be supported by fairly bearish expectations on upcoming US activity data.”
“Our US economist is at the lower end of consensus for Friday’s payrolls, but before then there may not be enough bad news to drive the dollar much lower. A stabilization of the DXY in the 101.50/102.0 range is our baseline through Thursday.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
