US Dollar Kicks Off The Week On A Gloomy Note Following Report Of Declining Manufacturing Activity

US Dollar Kicks Off The Week On A Gloomy Note Following Report Of Declining Manufacturing Activity - USD banknote
Bill Cascade   NEW 18/06/2019 00:00:00 Forex

The US dollar started the week on a bearish trend following the release of a report which revealed that manufacturing activities declined to their lowest point since 2016.

Prior to the news, the dollar had been hovering near its two-week high, which had achieved earlier on Monday’s trading session on the heels of the Federal Reserve’s upcoming meetings. Although the USD experienced a decline, many other currencies remained strong pending the Fed meetings.

The data released on Monday revealed that manufacturing activity contracted in the New York region over the past two and a half years. The report plus the rising unemployment levels and weak inflation data put more pressure on the Fed, thus increasing the chances of interest rate cuts before the end of 2019.

US dollar previously held steady

The US dollar had previously demonstrated a steady performance on Monday in anticipation of the Fed meetings. However, there was some volatility, especially due to the conservative approach by investors as they wait to see how things will play out later on in the week.

The Fed is expected to hold meetings on Tuesday and Wednesday although there are no rate cut expectations. Analysts expect rate cuts to start happening in July, which is just a few weeks away.

Meanwhile, it also looks like the unappealing manufacturing report negatively affected the performance of the US dollar index. The latter is used as a yardstick to determine the strength of the USD against half a dozen major currencies.

Euro grows stronger against the US dollar

The US dollar index dropped to 97.39 by 2:25 P.M. The weakening USD provided a chance for the Euro to rise to 1.1233 after a 0.3% gain for the EUR/USD currency pair. The European Central Bank has scheduled a meeting which will take place in Portugal on Thursday. It is also expected to decide interest rates.

Dolar Index Chart

Source

A few weeks ago there were expectations of a Fed rate cut in June. However, CME Group recently revealed that the chances of interest rate cuts in June have gone down to 20.8%. The organization did, however, note that the probability of a rate cut in July is still high. Dovish opinions by the Federal Reserve and a report indicating a slowing employment market have further fueled rate cuts expectations.

Manulife Asset Management’s portfolio manager Charles Tomes is convinced that the upcoming meetings will lead to more volatility, forcing investors to take a cautious approach. Tomes also believes that the Fed has stretched its decision to hold out on rate cuts for far too long and that the Fed is due to make changes.

Meanwhile, across the pond, the Bank of England plans to implement changes as far as the monetary policy is concerned. Stephen Gallo, who is in charge of BMO Capital Markets' foreign exchange strategy, believes that the Bank of England will likely not implement any other financial measures before Brexit negotiations are finalized.

 

 

 

 

 

More articles

US Dollar Under Pressure On Weak Economic Data

Bill Cascade   NEW 09/10/2019 00:00:00 Forex

The US dollar is struggling for direction, having lost momentum on weak employment data. The greenback has registered impressive gains, in recent months, as other majors currencies continued to edge lower...

Buy to Open Definition, Explained in Detail with Example

Bill Cascade   NEW 08/10/2019 00:00:00 Guides

There are four types of options that are commonly used in the industry. Alongside buy to open, these include buy to close, sell to open and sell to close. Here we look at precisely what the basic definition of buy to open means, alongside offering an example of it at work. By analyzing the term further, we can provide a better understanding...

Swiss Franc Eyes Fresh Gains On Safe Haven Appeal

Bill Cascade   NEW 07/10/2019 00:00:00 Forex

The Swiss franc has lost some ground against other major currencies in recent trading sessions. For starters, it is trading at two-week lows against the Euro, which has tumbled to two-year lows in recent months. While the weakness of the Swiss franc stems from weak economic data, a bounce-back could be in the offing going forward...

Turkish Lira On The Recovery As Swedish Krona Woes Persist

Bill Cascade   NEW 06/10/2019 00:00:00 Forex

Turkey's government remains optimistic about the Lira appreciation, against the dollar, over the next three years. Economic forecasts by the finance ministry indicate the government expects the country’s economy to expand by 5% next year...

Argentines Turn To the Polls To Avert Economic Crisis And Peso Volatility

Bill Cascade   NEW 03/10/2019 00:00:00 Finance

The country is struggling with one of the highest levels of inflation at 54%. High inflation levels have affected the way of life, as prices of goods continue to rise, and small businesses struggle to remain afloat... 

Free margin - Credit