Buying the Retreat in the USD After Positive Manufacturing, Employment Figures
Today’s trading began with a cautious tone, but Treasury yields quickly surged, with 10-year yields surpassing 4.30% for the first time since last October. Surprisingly, this didn’t significantly inflict much action in the broader markets, although recent trends suggest a shift during US trading over the past week.
The dollar started the day with some fluctuation before turning weaker and retreating around 50 pips across the board. This weakening coincided with a rebound in the Chinese Yuan, after days of slipping lower. Reports indicate that Chinese officials are urging state banks to intensify efforts to stabilize the currency this week. This move sparked a recovery in the Australian dollar, which had been trading lower due to a disappointing jobs report early this morning.
AUD/USD rebounded from around 0.6370 last night to touch 0.6450. Subsequently, other major currency pairs also made some gains against the USD. Notably, USD/JPY experienced a decline from 146.30 earlier in the session to the current level of 145.70. This drop occurred despite higher yields during the day.
In another development, USD/CAD also retreated, shedding 50 pips and touching the 1.35 level. Although, today’s economic data from the US was quite upbeat, showing that the economy is not heading into a recession. The Philly FED manufacturing index showed an improvement, so the uptrend in the USD should resume soon.
Philadelphia-Area Manufacturing Data
- August US Philly Fed manufacturing index +12.0 points vs -10.0 expected
- Philly Fed business index +12.0 points vs -10.0 expected
- First positive reading since last August
- Prior was -13.5 points
- Six-month index +3.9 points versus +29.1 last month
- Capital expenditures index -4.5 points versus +8.6 last month
- Employment index -6 points versus -1 last month
- Price paid index +20.8 points versus +9.5 last month
- New orders index +16.0 points versus -15.9 last month
The current general activity diffusion index showed improvement, rising from -13.5 last month to 12.0 this month. This marks the first positive reading since August 2022. Nearly 25 percent of the surveyed firms reported growth, up from 17 percent last month, surpassing the 13 percent reporting decline (down from 30 percent). Additionally, 58 percent of firms reported no change in current activity, compared to 49 percent last month. The new orders index, which had been negative for the past 14 months, surged by 32 points to reach 16.0. The shipments index also saw an 18-point increase, reaching 5.7.
However, employment experienced a decline overall, as indicated by the employment index dropping 5 points to -6.0. Around 18 percent of firms reported a decrease in employment, while 12 percent reported an increase. The majority of firms (70 percent) reported no change. The average workweek index increased by 9 points to 6.3.
Firms reported an overall rise in prices, although both price indexes remain close to their historical averages. In response to special questions this month, firms were asked to forecast changes in prices for their products and for U.S. consumers over the next four quarters. For their own prices in the coming year, firms’ median forecast indicated an expected increase of 4.0 percent, slightly lower than the 4.5 percent forecast from May. Firms reported a median increase of 5.0 percent in their own prices over the past year, down from 6.0 percent in the previous quarter. The median forecast for the rate of inflation for U.S. consumers over the next year was 4.0 percent, a decrease from 5.0 percent in May. Looking ahead, the firms’ median forecast for the 10-year average inflation rate was 3.5 percent, a slight increase from 3.3 percent.
USD/JPY Live Chart
ABOUT THE AUTHOR
See More
Sidebar rates
Add 3442
Related Posts
SaveAdd 3440
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals