Get ready for a surge in currency volatility as US markets resume trading after the Labour Day weekend. The focus of the day is on the ISM manufacturing index in the US, a key indicator that has been in contraction territory for months. ING’s FX strategist Francesco Pesole anticipates that we may need to see a weak number to trigger recession concerns and push the dollar lower.
DXY Expected to Stabilize in the 101.50/102.0 Range
The consensus forecasts a slight improvement in the ISM manufacturing index for August, with particular attention on the ISM Prices Paid sub-index. A decline in this sub-index could impact the Fed’s stance on inflation, influencing market sentiment. The recent CFTC speculative positioning data shows a neutral stance on the dollar, indicating potential for a downward trend. With expectations of a Fed rate cut and cautious outlook on upcoming US economic data, the dollar may remain stable in the 101.50/102.0 range until Thursday.
Analysis:
The ISM manufacturing index release today could impact currency markets, particularly the US dollar. A weaker-than-expected number may trigger concerns about a recession, leading to a decline in the dollar’s value. With market positioning neutral and expectations of a Fed rate cut, the dollar could stabilize in the short term. Keep an eye on upcoming US economic data for further insights into currency market movements.