Yesterday the US Dollar lost more than 100 pips after the FOMC and Powell’s comments which supported the FED rate cut in June. However, today other major central banks turned dovish, with the SNB cutting interest rates unexpectedly, while the data from the US showed that the US economy is in decent shape, not showing any major weaknesses.

Overall, while there was a slight moderation in the expansion of the services sector according to the PMI data, the manufacturing sector continued to show strength. Additionally, the significant increase in existing home sales for February suggests robust activity in the housing market, outpacing expectations and indicating continued strength in the real estate sector.

Existing Homes Sales for February 2024

• Existing home sales for February came in at 4.38 million, surpassing expectations of 3.94 million. This represents a significant increase from January’s existing home sales of 4.00 million.
• The change in existing home sales from January to February was reported at +9.5%, compared to the previous change of +3.1%.

US Flash PMIs on Services and Manufacturing from S&P Global

• March flash S&P Global services PMI came in at 51.7 points, slightly below expectations of 52.0 points. This indicates a slight slowdown in the expansion of the services sector compared to the previous month’s reading of 52.3 points.
• Manufacturing PMI for March was 52.5 points, exceeding expectations of 51.7 points. This suggests continued expansion in the manufacturing sector, with an improvement from the prior month’s reading of 52.2 points.
• The Composite PMI, which combines both services and manufacturing, was reported at 52.2 points, slightly lower than the previous reading of 52.5 points.

There were a few minor caveats today, but the US economic data presents a positive picture overall, indicating that the economy remains relatively strong. While there are some signs of softening in services activity, forward-looking indicators suggest confidence in future economic prospects.

• The services PMI was the only miss among the data releases, indicating a slight moderation in the expansion of the services sector.
• However, the manufacturing number outperformed expectations, indicating continued strength in the manufacturing sector.
• Moreover, the six-month forward indicator rose to a two-year high, signaling optimism about future economic conditions.

Despite some concerns about a potential slowdown in the economy and the possibility of Federal Reserve rate hikes, market sentiment remains uncertain. Investors are hesitant to fully embrace the idea of rate cuts without substantial evidence of economic weakness. Consequently, there is a constant sense that the Fed may postpone rate cuts, especially if economic data continues to show resilience.

However, there is also a recognition that delaying rate cuts for too long could potentially coincide with the approaching election, adding another layer of uncertainty to the market outlook.

EUR/USD Live Chart