US dollar retreats after lower-than-expected PMI reading

The US Dollar Index traded in a downward trend at 103.7, before recovering, at the time of writing, to 103.895, denoting a decline of 0.24%, and representing a weak end to the trading week.

The US ISM Manufacturing PMI fell disappointingly at 47.8, far from expectations of a 49.5 mark. Expectations for the start of a quantitative easing cycle by the US central bank, the Federal Reserve, in June remain valid.

The US dollar index began the new month of trading, March 2024, on Friday with a slightly lower opening price at 103.7. This decline was primarily due to the contraction in the US manufacturing sector in February.

Despite the general decline in the performance of the manufacturing sector, Federal Reserve officials refuse to start cutting interest rates.

Meanwhile, while the US economy’s performance is sending mixed signals, markets are in line with the Fed’s forecast and now expect 75 basis points of easing in 2024, starting in June.

Data from the Manufacturing Supply Institute revealed weak numbers for February. The report revealed that the manufacturing PMI fell to 47.8 compared to the previous reading of 49.1 recorded by the index in January, significantly contradicting market expectations of 49.5.

Manufacturing prices came in at 52.5 compared to the previous 52.9, while the The employment index fell to 45.9 from 47.1, and the new orders index fell to 49.2 from 52.5.

As for the upcoming Fed meetings, the markets have ruled out an interest rate cut at the next March meeting, and the odds of a rate cut for May remain weak and for the June meeting, these odds rise to 50%.