US Dollar Still Weak! Will PMI Data Change Market Patterns?


On Thursday, the US dollar fell to a record high in the stock market, boosting optimism across multiple asset classes. Traders analyzed several studies of business activity, most of which reported results that exceeded expectations, to assess the impact of interest rates.

Preliminary Purchasing Managers' Index (PMI) data showed that the decline in eurozone business activity moderated in February, with the services sector showing signs of improvement. Although manufacturing data declined, the overall outlook was seen as improving.

The euro strengthened by 0.34% to trade at $1.0856, boosted by stronger-than-expected French activity data. However, it fell slightly after disappointing German data. Sterling also gained, strengthening 0.3% to $1.2674, supported by positive British PMI data. The yen remained stable at 150.26 against the US dollar.

The US dollar index, which measures the US dollar against six major currencies, slipped 0.3% to 103.67, on track for its first weekly decline of nearly 0.6% in 2024. Market optimism, tending to weigh on the US dollar coupled with gains in stocks Japan and Europe to the top.

Despite the recent decline, the US dollar index is up more than 2% for the year, with traders discounting expectations for some rate cuts by the Federal Reserve. US business activity data is expected to be released later in the day which will provide a clearer direction.

The Australian currency, sensitive to risk sentiment, strengthened 0.5% to $0.6584, while the safe-haven Swiss franc also strengthened, with the US dollar slipping 0.26% to 0.876 francs.

Minutes of the Fed's latest policy meeting confirmed the central bank's cautious approach to rate cuts, with expectations for a cut sometime this year. Market players now expect about a 30% chance of a rate cut in May, much lower than a month ago.