US Dollar Under Watch: The US dollar is being closely watched today as traders await fresh US PMI readings. Eurozone weakness has sent the euro into a tailspin, boosting the dollar ahead of the data. If today’s US data comes in below expectations, the focus could return to Fed easing expectations. Powell has cautioned traders against expectations of rate cuts, leaving the dollar vulnerable to a slide if the data continues to trend lower.
US PMI Forecast: The market is expecting the August manufacturing PMI to come in at 48.6, while the services PMI is expected to come in at 55.3. If the data is as expected, it could cap the dollar’s advance. If the data is below expectations, the dollar could come under downward pressure. Any positive surprise could support dollar buying at the start of the week.
November Fed Pricing: The market is currently pricing in only a 50% chance of a rate cut in November. Any further weaker data could send the dollar lower and raise rate cut expectations.
Technical Views: DXY Index has been holding around 100.93 since late August. Focus is on breaking 99.67 as support, while the price needs to return above 102.46 to mitigate downside risks.
USD Under Watch: The USD is on the defensive today, as traders await US PMI readings. Weak eurozone indicators have led to the euro’s collapse, strengthening the dollar ahead of the data. If US data is below expectations, the focus could shift to Fed easing expectations. Powell has cautioned that no further cuts are expected, but a continued downtrend could increase easing pressure, sending the dollar lower.
US PMI Forecast
The market is expecting the manufacturing PMI to come in at 48.6, while the services PMI is expected to come in at 55.3. If the data comes in as expected, it could cap the dollar’s advance. Weaker-than-expected data could push the dollar lower, while any positive surprise could support buying at the start of the week.
Fed pricing in November: Market sees only 50% chance of November rate cut. Any additional weak data could drag the dollar lower and raise rate cut expectations.
Technical Views: The DXY has been holding around 100.93 since late August. Focus on breaking 99.67 as support, while the price needs to return above 102.46 to mitigate downside risks.
China stimulus hopes support slowing economic activity in Asia: Asian stocks rose on expectations that China will implement additional stimulus measures to stimulate the world’s second-largest economy after the start of the monetary easing cycle in the United States. China announced that it is preparing to hold a rare economic briefing by three of its top financial regulators. The announcement coincided with a cut in one of its short-term interest rates, which fueled speculation that new stimulus is imminent. Markets are expecting additional stimulus measures to stimulate the global economy and revive China’s GDP.
The gloomy picture was exacerbated by a series of Chinese data on Friday. The MSCI Asia-Pacific index rose in response to higher stocks in South Korea, Hong Kong and China. The yen fell after Bank of Japan Governor Ueda said on Friday that officials were in no rush to raise interest rates again. Asia suspended cash trading in U.S. Treasuries due to a holiday in Japan. The dollar index was relatively unchanged as Australian bonds fell in anticipation of the central bank’s expected extension of the policy pause on Tuesday..
US Data Schedule
A relatively quiet week for financial markets after last week’s high-risk events, with investors focusing on speeches from several US Federal Reserve officials, interest rate decisions from the Reserve Bank of Australia and the Swiss National Bank, and major economies’ purchasing managers’ indices. A number of central bankers are scheduled to speak as the dust settles after the Fed’s 50 basis point rate cut last week. These speeches are expected to provide a comprehensive look at current sentiment within the Fed regarding inflation and policy expectations.
Highlights include New York Fed President John Williams’ speech at a conference on Thursday, as well as pre-recorded remarks from Chairman Jerome Powell. The S&P 500 flash PMIs are the first item on the US data calendar, which will then be crowded with consumer confidence, new home sales, weekly jobs, final Q2 GDP, durable goods, and the personal consumption expenditures price index, the Fed’s preferred inflation gauge, on Friday. In addition, the University of Michigan’s sentiment and inflation forecasts are due on Friday. The Reserve Bank of Australia is widely expected to keep its benchmark cash rate at 4.35% on Tuesday, while also reiterating its commitment to keeping the rate higher for an extended period, given persistent inflation and a resilient labor market.
The RBA releases its Financial Stability Review on Thursday, and the August CPI is due on Wednesday. The Swiss National Bank is expected to cut its key interest rate from 1.25% on Thursday. Futures markets are pricing in a 25bp cut and pricing in a 44% chance of a 50bp cut as inflation eases and growth slows. The only important data releases are the manufacturing PMI, services PPI and Tokyo CPI for September, as Japan is currently on holiday on Monday.
