The United States Dollar enters the morning largely on the back foot as investors bet that the US currency would weaken the most when global central banks eventually stop raising interest rates.
Overview
Yesterday, Treasury yields slid, and the ISM manufacturing index showed further contraction, coming in at 46.3, the lowest number since the beginning of the pandemic in 2020. The Bloomberg Dollar Spot Index slipped and hit its weakest point since early February as well, a sign of broad USD weakness.
Though OPEC+ announced a surprise production cut of a million barrels a day, markets largely shrugged this off because of these sluggish factory output numbers. Fears of a “hard landing” appear to be re-emerging inside the US as this week’s surveys from March indicate industrial production may be running at a growth rate of less than 1 percent. A weakening domestic economic picture coupled with increased oil prices may force the Fed to steer the nation toward recessionary territory, something economists were previously optimistic the central bank could avoid.
Today markets turn their attention to JOLTS job openings for February and factory order data, both due out at 10 AM Eastern. Traders will search for a glimmer of optimism in these numbers, but if the labor market remains tight while factory orders decrease, it could spell doom for the Dollar throughout this year.
What to Watch Today…
- Durable Goods Orders 10AM
- Monex USA Online is always open
Monex USA introduces OPTIONS
With currency exchange rates in a constant state of flux, companies transacting cross-border face the risk of losing substantial sums of money if they fail to hedge their exposure to these shifts. Monex USA now offers a wide range of FX options that could help your business better manage risk. Learn More
AUD ⇓
The Australian Dollar posted one of few losses against the Buck yesterday after the Reserve Bank of Australia held its interest rate at 3.6%. Though Governor Philip Lowe left the door open to further increases, the language used in the statement from the central bank diluted any hawkish intent. AUD is down roughly three-quarters of a percent against USD, with NZD following suit and posting its own loss.
GBP ⇑
Pound Sterling led the rally against USD this morning and rose to its highest level since June 2022 as traders bet resilience in the UK economy may give the Bank of England room to keep up its current tightening cycle. Many major firms are no longer forecasting a GDP contraction for this year inside the UK, boosting bets for the region’s terminal interest rate.
