Key Takeaways:
- 💵 The dollar fell to a three-week low after data showed a slowing U.S. economy with weaker manufacturing and construction spending readings.
- 📉 The U.S. dollar index dropped to 104.14, the lowest level since mid-May, while also declining against the yen and euro.
- 🏭 U.S. manufacturing sector shrank with the Institute for Supply Management’s (ISM) PMI falling to 48.7 in May.
- 📈 The chances of a rate cut in September increased to around 59.1% after the ISM and construction spending data were released.
- 🌍 The European Central Bank is expected to cut rates, with markets pricing in 57 bps of ECB cuts in the year.
- 🇬🇧 Sterling rose against the dollar following the U.S. manufacturing data, with Nigel Farage’s announcement impacting Prime Minister Rishi Sunak.
- 🇲🇽 The peso weakened after the ruling party in Mexico declared presidential election results and raised concerns about potential policy changes.
- 🇮🇳 The Indian rupee rose to a 2-1/2-month high against the dollar as exit polls implied a significant mandate for Prime Minister Narendra Modi.
- 💸 68% of retail investor accounts lose money when trading CFDs with eToroPeriph.
- 💪 Investors remained bullish in July fueled by the belief in upcoming U.S. interest rate cuts
- 📉 Largest drop in global growth expectations since March 2022
- 🌍 Geopolitics seen as the biggest risk
- 📈 Monetary policy expected to ease for a ‘soft landing’ for the economy
- 📉 EUR/USD price near key resistance level 1.0900, potential for bearish divergence
Dollar Weakens as U.S. Economic Data Disappoints
The U.S. dollar faced significant pressure as data revealed a weakening U.S. economy, marked by lower manufacturing and construction spending figures. The dollar fell to a three-week low, with the U.S. dollar index dropping to its lowest level since mid-May. Market concerns about the U.S. economic performance raised doubts about the previously held belief in U.S. exceptionalism.
Global Economic Outlook Affects Market Sentiment
Investors were closely monitoring global economic indicators, with the European Central Bank expected to cut rates and geopolitical risks looming large. Despite uncertainties, investors remained bullish driven by expectations of U.S. interest rate cuts. However, the largest drop in global growth expectations since March 2022 highlighted the delicate balance of monetary policy adjustments for a ‘soft landing’ in the economy.