Disappointing Manufacturing Data Adds More Pressure To The US Dollar
The past couple of weeks have been quite rough on the US dollar whose performance continues to weaken from Monday when the currency dipped closer to its 3-month low. The US dollar is experiencing even more pressure following the latest market data release, which indicated a weak performance.
Data released for the Dallas Fed manufacturing activity index revealed that June’s manufacturing performance was weaker than anticipated. This adds to the pressure that the USD has been experiencing over the past three months due to the ongoing trade war. The currency has also demonstrated further weakness as the U.S-Iran tensions rise.
Manufacturing activity takes a hit amid volatile trade situation
The manufacturing data indicates the declining manufacturing activity in numerous regions across the U.S. The statistics of the manufacturing index give the Federal Reserve more reason to pull the trigger on interest rate cuts this year in an attempt to jumpstart positive economic performance in the U.S.
The U.S. has been locked in a heated trade battle with China, which has significantly contributed to the volatile trade situation not only in the U.S. but also on a global scale. President Donald Trump has been on a full-on offensive, even refusing to bow down until he rectifies what he termed as terrible trade agreements.
The recent falling out with Iran has seen the U.S. threaten to impose sanctions on Iran over the shooting down of an unmanned drone. These issues have so far contributed to highly volatile relationships between the U.S. and countries such as Iran, China, and Mexico. This has consequently affected the US dollar's performance, and this effect is evident in the US dollar index.
Meanwhile, the EUR/USD has been trying to maintain a strong position at around the 1.1400 level. However, its performance has been rather muted because investors have been exercising caution with their investments, especially with the release of disappointing market data. The cautious approach has also been spurred by the volatile global trade situation.
The EUR/USD reached a 3-month high at the 1.1412 level on Monday, but it then demonstrated signs of decreased momentum. The currency pair’s price level performed well below that level following the bear trend on Tuesday during the European trading session.
The EUR/USD’s performance
Analysts believe that the downtick that has been witnessed in the EUR/USD currency pair so far this week is due to the lack of a fundamental catalyst to set things into motion.
Traders may have held back on their bearish bets on the USD prior to a speech by Federal Reserve Chairman Jerome Powell. The speech might be the sole factor that supports profit-taking from short-term overbought market conditions.
Among the disappointing market data reports is the Consumer Confidence Index, which tanked from 131.3 in May to the 121.5 level in June.
Home sales also experienced a 7.8% decline in May, which was way off the consensus estimate by a noteworthy margin. This means that its performance was worse than that reported in April where homes sales dropped 3.7% home.