The U.S. dollar gained significant traction during late Tuesday trading, propelled by the impressive performance of the S&P Global Manufacturing Purchasing Managers’ Index (PMI) in the United States. Basically, the dollar strengthens in sharp contrast to the Eurozone PMI, which plummeted to its lowest point in nearly three years. Such a dynamic stoked concerns of a potential recession.
Dollar Crash Avoided – Steady Index Rise
The dollar index, a key indicator measuring the greenback against six major currencies, surged by 0.69% to reach 106.2679 in late trading.
Robust U.S. PMI Figures
The U.S. S&P Global Composite PMI for October climbed to 51, marking an increase from September’s 50.2. Notably, the manufacturing PMI witnessed a boost, rising to 50 in October from 49.8 in September. Simultaneously, the services PMI exhibited growth, reaching 50.9 from the previous 50.1, surpassing expectations set by analysts.
Decline in Eurozone PMI
Conversely, the IHS Markit flash Eurozone Composite PMI, a critical barometer of overall economic health, declined to 46.5 in October, hitting its lowest point since November 2020.
Weakening Euro and Pound
The euro saw a decline during late New York trading, falling to 1.0589 U.S. dollars from 1.0674 in the previous session. Similarly, the British pound experienced a drop, sliding to 1.2162 U.S. dollars from the earlier 1.2255.
U.S. Dollar Collapse Out of Sight?
The U.S. dollar exhibited strength against several currencies, benefiting from a retreat in U.S. yields, creating favourable conditions for the greenback.
Market Outlook for the U.S. Dollar
Looking ahead, the U.S. dollar is poised for a relatively stable trading day as no significant catalysts are expected. Economic data releases are limited, with a focus on New Home Sales figures and an address by U.S. Federal Reserve Chairman Jerome Powell.
Global Market Flotation and U.S. Dollar
Asian markets showcased gains, with Japan and China’s indices rising by over 0.5%. In contrast, European and U.S. futures faced challenges following mixed earnings reports from companies like Alphabet and Microsoft. Market attention is now centred on Meta’s earnings after the U.S. closing bell on Wednesday.
U.S. Dollar Index Analysis
The U.S. Dollar Index (DXY) continues to trade above the 106.00 mark, setting the stage for a stable day with no significant market-moving events anticipated. Potential upside targets include 106.42, which could lead to a push towards 107.00. On the downside, look for support at 105.12, a historic pivotal level.
The U.S. dollar strengthens in the spotlight as it experiences fluctuations amid ongoing economic data releases and corporate earnings reports. The benchmark 10-year U.S. Treasury shares are trading at 4.83%, providing a sense of stability to the markets. The Federal Reserve is widely expected to keep interest rates unchanged in November, and the DXY’s direction hinges on upcoming events, including the ECB, U.S. GDP, and U.S. PCE reports.