US DOLLAR OUTLOOK: FLASH PMI REPORT HEATS USD, HOW TO OFFER FEDI
- The US dollar is stronger on Friday morning aboard the larger currency pairs
- US dollar bulls trying to maintain control through persistent inflation fears
- Next week’s Fed announcement poses a significant risk of events amid uncertainty
The US dollar is gaining slightly during Friday’s asset trading. The broader DXY index is 0.15% higher during the day due to continued buying pressure following the newly released PMI data. US PMIs were mixed on the surface and active economic activity in the manufacturing sector, which was undermined by the slowdown in growth in the services sector as a whole. The manufacturing sub-component improved to 63.1 and exceeded the consensus forecast of 62.0, while the services sub-component fell to 59.8 and met the July expectations of 62.0.
Overall, the PMI aggregate fell from 63.7 in June to 59.7. However, the details underlying the latest PMI report are said to be more important. In particular, it was noted that the inflation rate of sales prices of goods and services rose to a record high in the third reading, as companies wanted to bear higher costs. In addition, output growth is slowing due to widespread capacity constraints and labor shortages.
DXY INDEX – US DOLLAR CARD: HOUR CANDLE CANDLES (July 19 to July 23, 2021)
As IHS Markit’s latest PMI data reflect the risk of inflation, it could help boost the US dollar, as evidence of persistent price pressures revives speculation as the Federal Reserve reduces asset purchases. It focuses on the Fed’s interest rate decision, which is due next Wednesday, July 28 at 18:00 GMT.
I suspect it USD price behavior remains perky towards this risk of high-impact events, but at the end of the day it could provide an opportunity to dampen the flow of power, given the likelihood that Fed officials will adhere to their temporary inflation stories and err on the side of policy due to delicate delta concerns.
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