US dollar falls amid manufacturing slump

The US dollar edged lower in the latter half of Wednesday’s session following an unexpected contraction in the US manufacturing sector this month.

Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR losing ground at €1.1879, and GBP/USD dipping to $1.2884. GBP/CAD is rangebound at CA$1.7812, while GBP/AUD surges to AU$1.9773 and GBP/NZD ticks up to NZ$2.1730.

Looking ahead, will an uptick in the latest US GDP release see the ‘greenback’ rally against its peers?

What’s been happening?

The US dollar fell yesterday afternoon following the release of the latest preliminary PMIs. While activity in the services sector surged to a twenty-eight-month high in the US this month, manufacturing output unexpectedly contracted.

Mixed PMIs coupled with softening US Treasury bond yields saw the safe-haven ‘greenback’ edge lower, despite an ongoing period of risk-off flows throughout the session.

Meanwhile, the euro struggled to find a clear direction, with the Eurozone’s PMIs deviating from market projections. Decelerating services and manufacturing growth stymied the common currency, reinforcing concerns about the health of the bloc’s economy.

In addition, a better-than-forecast German GfK consumer confidence indicator for August fell largely by the wayside. Though reaching its highest level since April 2022, the survey remained firmly below 0.

The pound found success against some if its peers, while holding steady against others on Tuesday. Preliminary PMIs in the UK showed an expansion across the UK’s private sector, lending GBP support early in the session.

What’s coming up?

Turning to today’s session the focus will be on the latest GDP release in the US. Economists expect to see an acceleration of growth in the second quarter, which could see the ‘greenback’ rebound from recent lows.

Also due for release in the US is the latest durable goods orders data. While less impactful than North America’s GDP report, increased manufacturing output could lend USD additional support this afternoon.

Germany’s latest Ifo business climate indicator is due for release this morning, with further signs of waning German morale likely to weigh on the single currency. A speech from European Central Bank (ECB) President Christine Lagarde could also drag on EUR, should the senior rate-setter be seen to maintain a dovish outlook.

In the UK, a lack of market moving data could pull the Confederation of British Industry’s (CBI) business optimism index into focus. Forecast to rise in the third quarter, an improving economic outlook from British businesses could lend GBP modest support.