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ISM PMI Decline Hits Markets; Dollar Remains Strong

ISM PMI Decline Hits Markets; Dollar Remains Strong

U.S. markets resumed trading with weak ISM Manufacturing PMI data and strong dollar demand. Key data and central bank decisions will influence currencies and oil.

What Happened in the U.S. Session?

On September 3, U.S. and Canadian financial markets resumed activity following the Labour Day weekend. Key economic data released included the ISM Manufacturing PMI, which contracted for the fifth consecutive month, recording 47.2 for August. While this improved from July’s 46.8, it fell short of the forecasted 47.5. The decline in the new orders sub-index, a key indicator of future activity, continued its downward trend, reflecting persistent weak demand and lower output.

Despite the poor ISM report, the U.S. dollar saw strong demand, with the dollar index (DXY) reaching a high of 101.91 before settling at 101.75 by the session’s end.

What Does It Mean for the Asia Session?

Australia’s economic growth has been sluggish, with the first quarter of 2024 showing only a 0.1% QoQ increase. The second quarter is forecasted to improve slightly to 0.2% QoQ. If the results fail to meet these expectations, the Australian dollar (AUD) may face significant headwinds today.

The Dollar Index (DXY)

Key News Events Today:

  • JOLTS Job Openings at 2:00 pm GMT

What to Expect from DXY Today:

U.S. job openings have decreased from 9.4 million in August 2023 to 8.2 million in June, marking a nearly 13% drop. The estimate for July is 8.1 million. A lower-than-expected number of job openings could heighten concerns about the labor market, potentially putting upward pressure on the dollar.

Central Bank Notes:

The Federal Reserve maintained its target range for the federal funds rate at 5.25%-5.50% for the eighth consecutive meeting. The Fed focuses on balancing maximum employment with its 2% inflation target. The Federal Reserve will hold its next meeting on September 17-18, 2024.

Next 24 Hours Bias: Weak, Bullish

Gold (XAU)

Key News Events Today:

  • JOLTS Job Openings at 2:00 pm GMT

What to Expect from Gold Today:

A continued decline in job openings could signal a weakening labor market, potentially supporting gold prices as the dollar faces downward pressure.

Next 24 Hours Bias: Weak Bearish

The Australian Dollar (AUD)

Key News Events Today:

  • GDP at 1:30 am GMT

What to Expect from AUD Today:

Australia’s GDP growth has been weak, and a disappointing second-quarter result could exacerbate pressure on the Aussie dollar.

Central Bank Notes:

The RBA has kept the cash rate target unchanged at 4.35% for six consecutive meetings. Inflation remains above the 2-3% target range, with expectations for a return to target in late 2025. The next meeting is on November 5, 2024.

Next 24 Hours Bias: Medium Bearish

The Kiwi Dollar (NZD)

Key News Events Today: None

What to Expect from NZD Today:

The Kiwi dollar fell below the 0.6200 level during the U.S. session and was trading around 0.6170 at the start of the Asia session. Support stands at 0.6125, and resistance reaches 0.6250.

Central Bank Notes:

The RBNZ reduced the OCR by 25 basis points to 5.25% in August. While inflation is returning to target, economic activity has weakened, leading to cautious outlooks on further easing. The next meeting is on October 9, 2024.

Next 24 Hours Bias: Weak Bearish

ISM PMI Decline Hits Markets; Dollar Remains Strong

The Japanese Yen (JPY)

Key News Events Today: None

What to Expect from JPY Today:

The yen strengthened following comments from BoJ Governor Kazuo Ueda, who suggested potential future rate hikes. USD/JPY fell below 145.50, with support at 143.50 and resistance at 147.20.

Central Bank Notes:

The BoJ continues to aim for an uncollateralized overnight call rate of around 0.25%, with reduced JGB purchases. Experts expect inflation to align with the 2% target in the medium term. The next meeting is on September 20, 2024.

Next 24 Hours Bias: Medium Bearish

The Euro (EUR)

Key News Events Today:

  • Composite PMI at 8:00 am GMT

What to Expect from EUR Today:

A stronger-than-expected Composite PMI could support the Euro, which has been under pressure from a strong dollar. The forecast is for the PMI to rise from 50.2 to 51.2.

Central Bank Notes:

The ECB kept interest rates unchanged in July. The Eurozone economy grew in Q2 but at a slower pace, with services leading recovery. The next meeting is on September 12, 2024.

Next 24 Hours Bias: Weak, Bullish

The Swiss Franc (CHF)

Key News Events Today: None

What to Expect from CHF Today:

Softer inflation in Switzerland saw USD/CHF rise to 0.8537 before falling below 0.8500. Support is at 0.8400, and resistance is at 0.8560.

Central Bank Notes:

The SNB lowered its key policy rate to 1.25% in June. Growth is moderate, with inflation expected to remain near the target. The next meeting is on September 26, 2024.

Next 24 Hours Bias: Weak Bearish

The Pound (GBP)

Key News Events Today:

  • Composite PMI at 8:30 am GMT

What to Expect from GBP Today:

The Pound could be supported by a higher-than-expected Composite PMI, with forecasts suggesting an increase from 52.8 to 53.4.

Central Bank Notes:

The BoE reduced the Bank Rate to 5.00% on August 1, 2024. Analysts expect inflation to rise to around 2.75% in the year’s second half. The next meeting is on September 19, 2024.

Next 24 Hours Bias: Medium Bearish

The Canadian Dollar (CAD)

Key News Events Today:

  • BoC Rate Statement at 1:45 pm GMT
  • BoC Press Conference at 2:30 pm GMT

What to Expect from CAD Today:

The BoC plans to announce its third 25-bps rate cut of the year. Governor Tiff Macklem’s press conference may significantly impact the Loonie, with the potential for heightened selling pressure if a dovish tone is adopted.

Central Bank Notes:

The BoC cut the overnight rate to 4.50% in July. Economic growth is forecasted to rise, but inflation and slack in the labor market remain concerns. The next meeting is today.

Next 24 Hours Bias: Medium Bearish

Oil

Key News Events Today:

  • API Crude Oil Stock at 8:30 pm GMT

What to Expect from Oil Today:

Crude oil prices dropped sharply due to potential increased Libyan supply and possible OPEC+ production hikes. API inventory data could reveal weaker demand, potentially putting further downward pressure on prices.

Next 24 Hours Bias: Strong Bearish

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