Key Takeaways:
- 💵 Dollar fell to a three-week low on weak manufacturing and construction data
- 📉 Dollar slid against yen and euro
- 🏭 US manufacturing index fell to 48.7 in May
- 🏢 US construction spending decreased for a second consecutive month
- 🛠️ Markets are starting to question US exceptionalism theme
- 📊 Fed funds futures increased chance of a rate cut in September
- 💱 Eurozone expected to cut rates after ECB meeting and rise in inflation
- 🇬🇧 Sterling rose against the dollar
- 🇲🇽 Peso weakened after Mexican presidential election result
- 🇮🇳 Indian rupee rose to 2-1/2-month high against the dollar
Dollar Weakens Due to Poor Economic Data
The US dollar saw a decline to a three-week low as weak manufacturing and construction data weighed on the currency. The dollar slid against the yen and euro, indicating a loss in strength compared to these major currencies. Additionally, the US manufacturing index fell to 48.7 in May, reflecting a contraction in the sector, while construction spending decreased for a second consecutive month. This trend has led markets to question the US exceptionalism theme, raising concerns about the overall economic performance.
Expectations of Rate Cuts and Currency Movement
The Federal Reserve’s futures market showed an increased chance of a rate cut in September, signaling a potential shift in monetary policy. In the Eurozone, the expectation of rate cuts following the ECB meeting and a rise in inflation could impact the value of the euro. Meanwhile, the sterling rose against the dollar, showcasing strength in the British currency. On the other hand, the peso weakened after the Mexican presidential election result, indicating volatility in emerging market currencies. In contrast, the Indian rupee saw an increase to a 2-1/2-month high against the dollar, showcasing relative stability.