As forex traders reposition themselves expecting a December rate hike from the Fed, the dollar has continued to climb, reaching seven-month highs against many major currencies and pressuring dollar-denominated commodities.
By Peter Martin
Monday, November 23, 2015
The US dollar gained against all its peers, most noticeably the Aussie dollar, with AUD/USD plunging 0.65% on Monday, though the euro held up better than most, thanks to a surprise improvement in the eurozone composite PMI. The composite PMI improved to 54.4 in the flash reading for November, up from 54.0 in October, and versus a consensus estimate of 53.9. The advance in the composite gauge, which now stands at a 54-month high, reflected upturns in both the manufacturing and services sub-indices. Manufacturing rose to a 19-month high of 52.8, while the services sector increased to a three-month high of 53.9. ‘The PMI shows a welcome acceleration of eurozone growth, putting the region on course for one of its best quarterly performances over the past four-and-a-half years,’ said Chris Williamson, Chief Economist at Markit. ‘The data are signalling GDP growth of 0.4% in the closing quarter of the year, with 0.5% in sight if we get even just a modest uptick in December.’ Despite this encouraging report, EUR/USD fell 0.1% to 1.0636.
Last month was still quite a soft spell for the domestic economy, according to the Chicago Fed’s national activity index (CFNAI), though it did show marked improvement from the weakness seen in September. The CFNAI climbed to -0.04 in October, up from September’s upwardly-revised -0.29 (originally reported as -0.37), with employment proving to be one of the key areas of improvement, which is unsurprising giving the strength of October’s payroll growth.
Stocks opened barely-changed on Wall Street, the major indices dipping slightly into the red at the opening, before the S&P 500 Index began to advance. Shortly after the opening bell in New York, the Dow Jones was down 13 points or 0.07%, while the S&P 500 Index was up 0.11% at 2091.4.
Regional surveys have been painting a mixed picture for US manufacturing in November so far, but the first nationwide gauge has disappointed to the downside. Markit’s flash reading for its manufacturing PMI came in at 52.6, down from 54.1 in October, and hitting its lowest level in 25 months. Though the above-50 headline level still indicates expansion, the new orders from abroad sub-index slipped into negative territory, illustrating that the strength of the dollar remains a strong headwind for export sales. ‘November’s flash PMI survey indicates that the manufacturing sector lost some growth momentum after the nice pick up seen in October, but still suggests the goods producing sector is expanding at a robust pace which should help support wider economic growth in the fourth quarter,’ said Chris Williamson, Chief Economist at Markit.
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