The US dollar tumbled against major rivals on Friday following the release of lackluster manufacturing activity data and weak new home sales. Tradersâ appetite for the greenback was also affected by anticipation for speeches of Federal Reserve officials today and US inflation data next week.
A fresh reading for the IHS Markit manufacturing purchasing managersâ index revealed a drop to 52.1 in June from 52.7 in May, which missed analyst estimates of a reading at 53.0. The index, which reflects manufacturing activity and the performance of firms within the sector, declined this month as output rates softened and new business growth slowed down.
Subindexes for job creation and inventory building had stronger readings in June, but failed to cancel out negative pressure from a slower pace of economic growth in the second quarter of the year. Readings of the main index that are above 50 indicate growth in the manufacturing sector.
The services purchasing managersâ index from IHS Markit also fell to reach 53.0 in June from 53.6 in May, falling short of expectations that pointed to a reading of 53.7. The index moved lower despite faster gains in new business intakes in the services sector, as input cost inflation jumped to the strongest rate in two years. Investors view readings for purchasing managersâ indexes as an early indicator for economic growth, which causes the US dollar to weaken with lower than expected numbers.
Meanwhile, sales of new single family homes disappointed in May, according to a report that was released by the US Department of Housing and Urban Development today. The report stated that new home sales rose 2.9% to 610,000 in May, which was lower than forecasts of a 5.4% gain. The smaller gain followed a drop in April that was revised down from an 11.4% loss to 569,000 to a 7.9% loss to 593,000.
Traders are searching for hints on Federal Reserveâs future monetary policy in economic data and speeches of Federal Reserve officials. Federal Reserve Bank of St. Louis President James Bullard, who is also a member of the Federal Open Market Committee, said in a convention in Nashville today that the central bank can afford to stop raising interest rates.
Bullard added that he believes a pause would allow the Federal Reserve enough window to observe how economic developments will play out in the short term, especially as economic data failed to impress since March. His view differed from those expressed by Federal Reserve officials last week, which increased anticipation for speeches by Federal Reserve Bank of Cleveland President Loretta Mester and Board of Governors member Jerome Powell later today.
The CME Group FedWatch tool showed a 44.4% probability of an interest rate hike in December, which would be the third one this year.
EUR/USD traded at 1.1199 as of 15:30 GMT on Friday after touching 1.1206 at 14:50 GMT, the pairâs highest level since June 19. EUR/USD began trading today at 1.1148. GBP/USD rose to 1.2737 today, after touching 1.2739 at 07:30 GMT. GBP/USD was at 1.2677 when the day started.
The Dollar Index, which tracks the performance of the US currency against other major peers, dropped to 97.22 as of 15:23 GMT today from 97.59 yesterday.
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