The U.S. Dollar is losing ground today after a dramatic change in mood across markets based on improving economic data in Europe and doubts over the sustainability of high-interest rates.
Additionally, equity markets across the pond reignited a sense of risk appetite. Strategists came out swinging this morning, calling this a time to enter into oversold equities, such as the S&P 500, indicating there could be some turnaround from the jump to the safe-haven buck and its treasuries.
Purchasing Managers Index figures in Europe as well as in the U.K. impressed, which caused a comeback for those currencies after reaching multi-month lows. Mexican Peso returned from weakening to its worst level since May, while other currencies are also climbing out of the hole they have been in for weeks.
September proved to be a month of growing doubts fueling uncertainty over economic demand down the line, and it was compounded by stellar job openings in the U.S., only worsening the concern over interest rates staying high for longer than markets desire. Today’s flip is important because it is backed by indicators demonstrating that economic resilience can be found elsewhere and that bleak outlook may not entirely pan out. A changing narrative is developing, and it could spark big swings downward for the greenback.
What to Watch Today…
- S&P Global US Composite PMI 50.1 vs. 50.2 expected
- Durable Goods Orders 10 AM
- U.S. Employment Situation Friday 8:30 AM
- Monex USA Online is always open
The Euro jumped by over half a percent following PMIs demonstrating that economic times may not be as bad as half of economists feel. The PMI Composite reading for the Eurozone was better than expected in September, 47.2 vs 47.1, but it was more crucial to see expansionary readings above 50.0 for Spain as well as Germany, thus suggesting the survey is looking towards investment and growth. Retail Sales tumbled more than expected, but overall it looks like numbers are completely defying the pessimistic take we have been accustomed to for weeks. A mild winter, much like it played out in 2022, could ease the negativity foreseen.
Sterling is the best performer among the majors as numbers out of the U.K. revealed a better-than-expected PMI survey. U.K. Service PMI almost had an expansionary reading coming in at 49.3 while the Composite improved to 48.5 from 46.8. In general, sour feelings between the UK and the EU are cooling after Brexit became less of a priority than security and cooperation while a conflict affecting energy supplies is underway. The Bank of England saw it fit to pause on its path to increasing interest rates and allow some breathing for the economy. We shall see if data keeps Pound surprising us, while it is worth remembering GBP is the fastest to recover after it dips.