US Dollar (USD) Plunges as Service Sector Contraction Deepens
The US Dollar (USD) slumped yesterday afternoon after US business activity unexpectedly fell to a 27-month low. The American services PMI was particularly troubling, dropping from 47.7 to 45, rather than rising to 49. Any score below 50 indicates contractionary territory.
This data indicates that the US economy is less healthy than previously thought. As such, the Federal Reserve may be more tempted to slow the pace of interest rate rises, and this hurt USD.
This afternoon, US durable goods orders could impact the ‘Greenback’, particularly if markets are hit with another surprise. Otherwise, risk appetite may exert most influence over the US Dollar.
Pound (GBP) Wavers Higher despite Mixed PMIs
The Pound (GBP) fluctuated yesterday, wavering higher against its weaker peers, as the UK economy fared better than the Eurozone and the US, according to the latest flash PMIs. Although a surprise contraction in manufacturing activity saw overall business activity almost stall this month, the UK’s vital services sector performed better than expected.
In addition, reports that the UK government may be considering a £100bn spending intervention to tackle the UK’s energy crisis may have cheered GBP investors.
Today, UK data is thin on the ground. As a result, domestic headlines around Britain’s cost-of-living crisis and the government’s response may drive movement in Sterling.
Euro (EUR) Muted amid PMIs and Pullback in Energy Markets
The Euro (EUR) was subdued yesterday following the Eurozone’s flash PMI results. Although overall private sector activity remains in contraction, it printed slightly better than forecast.
A pullback in gas prices may also have helped alleviate some of the pressure on the single currency. Nevertheless, the Euro languished near recent lows against many of its peers.
Looking ahead, a lack of Eurozone data may leave EUR without a clear direction. If any new concerns about the Eurozone economy spook investors, the Euro could trend lower.
Canadian Dollar (CAD) Bolstered as Oil Prices Rise
The Canadian Dollar (CAD) found some support yesterday as rising oil prices underpinned the crude-linked ‘Loonie’. However, worries about the US economy undermined CAD, as slowing demand in the US could hit Canadian exports.
Canadian data remains in short supply today. As a result, the ‘Loonie’ could continue to trade in relation to movements in the oil market.
Australian Dollar (AUD) Declines amid Risk-Off Trade
The Australian Dollar (AUD) retreated in overnight trade as a downbeat mood in Asian markets weighed on the risk-sensitive currency.
New Zealand Dollar (NZD) Falls as Sentiment Sours
Likewise, the risk-linked New Zealand Dollar (NZD) fell overnight as a bearish mood swept markets.