USD Rallies on Soft Manufacturing Data

The greenback advanced against its major rivals in the Wednesday trading session, edging higher against the euro toward the 1.46-level, while pushing the pound sterling to beneath the 1.60-figure and briefly dragging the Swiss franc to a 3-week low at 1.0447. The catalyst for the dollar’s gains was a sharply weaker than forecast report on Chicago PMI. Consensus estimates were looking for the PMI report in edge up higher beyond the key 50-level to 52.0, instead falling to 46.1 in September from a 50-reading in the previous month. The employment component edged up slightly 38.8 from 38.7 in August and the new orders index slumped to 46.3 from 52.5 previously.

The markets largely reacted to the weaker manufacturing figures with the US equity bourses losing ground early in the session and the riskier currencies relinquishing previous session’s gains versus the dollar. The final release of Q2 GDP revealed an improvement to -0.7% from -1.0% in the previous reading while the GDP deflator remained unchanged. The Q2 GDP sales component improved to 0.7%, up from 0.4% previously. Meanwhile, the September ADP private sector payrolls revealed a loss of 254k, versus an upwardly revised loss of 277 jobs from August.

The key highlight this week continues to be Friday’s September labor report. The market is expected the unemployment rate to creep higher to 9.8%, up from 9.7% a month earlier. Non-farm payrolls are seen improving in September, with a loss of 188k jobs compared with 216k jobs shed in August.