Home Daily Commentaries DXY remains strong amid positive PMI data

DXY remains strong amid positive PMI data

Daily Currency Update

The US dollar Index (DXY) continues to experience strong buying momentum, nearing the 105.00 level today. The index has been on the rise for the third consecutive session today, consistently supported by the notable upward movement in US yields witnessed in recent days.
This recent dollar price movement coincides with growing market expectations that the Federal Reserve is likely to commence interest rate reductions in the second quarter of 2024. The USD’s overall strength today is primarily driven by a resurgence in treasury yields during the overnight session. The 10-year note is currently hovering around 4.30%, a notable increase compared to its level of 4.06% just one week ago. Another point of support for the US dollar is the positive performance of the US ISM Services Purchasing Manager’s Index (PMI), which exceeded expectations and reached a six-month high of 54.5 in August.

Key Movers

Additional downward pressure on the euro has intensified against the USD, leading the EUR/USD pair to retreat below the crucial 1.07 support level and establish a fresh three-month low today. The European Central Bank (ECB) convenes in the upcoming week, with the market assigning approximately a 33% likelihood of a 25 basis point (bps) rate increase. Yesterday, Klaas Knot a member of the Governing Council, expressed his belief that the market was undervaluing the possibility of a rate hike. He is scheduled to speak again today, along with several other ECB representatives.

The GBP/USD pair is in a consolidation phase trading near the 1.25 level during the Asian trading session. At the same time, the DXY is hovering around 104.80 after pulling back from its highest point since March. The strength of the US dollar, supported by treasury yields and PMI data shows a stark comparison to the British pound which faced depreciation following a dovish statement from the Bank of England (BoE) Governor Andrew Bailey yesterday. Bailey indicated that the BoE is nearing the conclusion of its current cycle of interest rate increases.

Expected Ranges

  • EUR/USD: 1.0689 - 1.0731 ▼
  • GBP/USD: 1.2448 - 1.251 ▼
  • AUD/USD: 0.6364 - 0.6393 ▲
  • USD/CAD: 1.3634 - 1.3671 ▼