DXY: the upward momentum of the dollar remains


Yesterday's preliminary US manufacturing and services PMIs (from S&P Global) and new home sales in the US were disappointing, adding to recession fears.

The US S&P Global Composite PMI for August came in at 45, below forecasts of 47, also showing US business activity contracting for the second month in a row. Services PMI fell to 44.1, below the forecast of 49.2 and the previous reading of 47.3. The manufacturing PMI index, although still above the 50 level, fell to 51.3 from 52.2 in July.

"The August PMI data signaled further worrying signs for the health of the US private sector. Demand conditions deteriorated again, driven by the impact of higher interest rates and strong inflationary pressures on consumer spending, which weighed on activity," S&P Global said.

However, many economists believe that yesterday's correction of the dollar after the PMI index is over. In their opinion, expectations of Fed Chairman Powell's hawkish statements at the Jackson Hole forum should support demand for the dollar. This may provoke further growth in the DXY dollar index, which by the end of this week (Jerome Powell's speech is scheduled for Friday 14:00 GMT) may exceed 110.00. As we noted earlier, "after the breakdown of the local multi-month high 109.14, reached in mid-July, 110.00 will be the next upside target for DXY." By the way, yesterday DXY already tested the 109.14 mark, reaching a new local high since October 2002 at 109.20 at the beginning of the European trading session (at the time of this article publication, DXY futures were traded near the 108.60 mark, 60 points above yesterday's low).


Today at 12:30 (GMT) there will be a new driver in the dynamics of the dollar. At this time, the US Census Bureau will release data on orders for durable goods and capital goods. Their growth is expected in July, by +0.6% and +0.3%, respectively.

If the data turns out to be significantly weaker than the forecast, the dollar will again be under pressure.

However, so far we can only talk about correction. In general, the upward dynamics of the dollar remains.