The main currency pair reached its highest level since March 21, trading above 1.09. U.S. Treasury yields have decreased across the yield curve. Meanwhile, Wall Street had a mixed session, with the Dow Jones down 0.3%, while the S&P 500 and Nasdaq Composite gained 0.11% and 0.56%, respectively. Yesterday’s reaction in the currency and bond markets was largely due to a weaker ISM manufacturing report from the U.S., which increased speculation about an earlier interest rate cut by the Fed. This time, the poor data did not support the stock market sentiment.
The main currency pair “broke out” of the short-term consolidation, which was bounded by the levels of 1.0890 and 1.08. Thus, the EURUSD continues the upward momentum that started in mid-April. It turns out that breaking through the upper band of the downward channel, which had been in place since the beginning of the year, in mid-May provided a strong signal of a trend change, at least in the short term. The dollar lost value against most currencies. The USD/PLN pair fell below 3.9150 this morning, although a rebound is currently visible.
The market did not react to the lower-importance U.S. manufacturing PMI data, which turned out to be better than forecasted, revised up to 51.3 points from 50.9 points. In April, it was 50 points. Noticeable reaction occurred only 15 minutes later when the ISM manufacturing report was released at 4:00 PM. It was less optimistic, settling at 48.7 points, down from 49.2 points in April. The new orders sub-index dropped significantly from 49.1 points to 45.4. The production index also worsened. Employment improved, while the prices paid component decreased, which should be seen as a positive.
Today’s focus will be on the JOLTS survey, which will indicate the level of labor demand. This will be a prelude to upcoming U.S. labor market data. A continuation of the downward trend is expected, likely signaling further cooling. Tomorrow, the private ADP report will be released, followed by the weekly jobless claims data on Thursday, culminating in Friday’s monthly NFP report.
Poland’s PMI also disappointed, falling from 45.9 points to 45 points. The poorer result was somewhat surprising since similar measures in the eurozone improved in May, although the indices remain below the critical 50-point threshold. The report highlighted that a strong zloty negatively impacts the competitiveness of Polish exports. Demand worsened mainly from the largest economies of the Old Continent: Germany and France. New orders remain in a downward trend. A positive aspect is that business expectations for the next 12 months are improving.
Łukasz Zembik
Oanda TMS Brokers
