ISM reports made the risks of economic collapse more serious
US dollars fall on Monday following disappointing data, because this slowness in economic growth and increased fears of global recession will force the Federal Reserve and other major central banks to stop raising interest rates.
The hopes of less hawkish policies, cause ad return in the bond yields. US benchmark 10-year treasury yields fell back to 3.60 from above 4%, which was seen last Wednesday. On Monday opening, the 10-year Treasury yield was at 3.68%, down another 12 basis points from Friday's close. As the day continued, yields on 10-year bonds continued to fall more and at 3.60%, it is down 42 basis points from last week's peak.
Along with weakness in other economies around the globe, the September report of the Institute for Supply Management on Monday confirmed that manufacturing activity expanded at the slowest rate in nearly two and a half years. The ISM's purchasing managers index fell by more than expected to 50.9 from 52.8 in August, while detailed numbers show that all major subindices including new orders, employment, and prices paid have declined.
Data published last Friday show that the US core PCE price index raised by 0.6% in August, higher than 0.5% in market expectations, and 0% in July. In terms of annual rate, the data hit the largest increase since April 2022, at 4.9%, which also exceeded market expectations and the previous month of 4.7%. In addition, as the data show, personal spending in August also increases by 0.4%, which is twice than 0.2% of market estimates. However, as data were in line with expectations and it was priced in the market, did not make serious changes there. Now, focus will turn to the September inflation number and NFP data on Friday, October 7.
Last week until Wednesday, Hawkish Fed comments lifted the US dollar to fresh 20-year highs, climbing to 114.7. The volatile week for Us dollars closed at 112.1 on Friday. The weakness continued at the beginning of the week, especially after the US season, for reasons mentioned earlier. From the technical point of view, DXY remains bullish, moving above 20 DMA and trend line. However, the sharp fall of Stochastic shows that it lost its momentum. DXY pivot point sits at 110.90, and under that support levels are sitting at 109.56 and 107.62. Stable trading above the pivot point can increase USD demand.