US Dollar Remains near Lowest Level in 3 Years as Business Activity Lags Behind Forecast

The US dollar weakened against the euro on Thursday to remain near its lowest level in almost 3 years. A fresh data release that revealed lagging business activity in the United States added to mounting evidence that economic growth is losing momentum, which weighed on the greenback.

The non-manufacturing purchasing managers’ index from the Institute for Supply Management lost 3.5 points, from 57.4 in June to 53.9 in July, according to a report published today. Analysts expected the index to have a reading near its June level at 57.0, however, a slowdown in business activity dragged the index lower than expected.

The ISM report added that a subindex for business activity decreased 4.9 points to 55.9 last month, while another subindex for new orders declined 5.4 points to 55.1. The employment subindex also fell in June, losing 2.2 points to 53.6. Meanwhile, the price subindex gained 3.6 points to 55.7, which reflected higher prices for the second consecutive month. Readings above 50 indicate growth.

Today’s disappointing data followed a reading for the manufacturing purchasing managers’ index from the Institute for Supply Management on Tuesday, which also missed estimates. US data releases failed to impress in recent weeks, which weighed on investors’ sentiments and raised concerns that the Federal Reserve may not increase interest rates for a third time this year.

A jump in factory orders reduced the greenback’s drop today. The Census Bureau announced that new orders for durable goods manufactured in the United States grew 3.0% in June after decreasing 0.3% in May.

However, the US dollar strengthened against the British pound today despite its broader losses. The Bank of England decided to keep its current interest rate unchanged in a move that signaled that a change in monetary policy may not happen this year. The British pound erased gains that followed positive data for the services sector and plummeted after the central bank’s decision.

Looking ahead, traders anticipate tomorrow’s releases for nonfarm payrolls and unemployment rate in the United States. Employment data from the ADP Research Institute on Wednesday missed estimates, which signaled that tomorrow’s numbers may disappoint.

EUR/USD traded at 1.1881 as of 16:00 GMT on Thursday after rising to 1.1885 at 14:50 GMT. EUR/USD began trading today at 1.1846. GBP/USD was at 1.3144 following a drop to 1.3114 at 13:40 GMT. GBP/USD started the day at 1.3225.

The Dollar Index, which measures the strength of the US currency against a basket of its major counterparts, fell to 92.71 as of 15:55 GMT today from 92.83 yesterday.

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