The US dollar is mixed to kick off the trading week as investors comb through disappointing economic data amid fears of a global recession. As the trade strife escalates after higher US tariffs on Chinese and Mexican goods, markets are worried that this could lead to additional cooling in the sluggish global economy.
US manufacturing activity slumped last month as the Institute for Supply Management (ISM)âs manufacturing index declined to 52.1 in May, down from 52.8 in April. However, ISM manufacturing employment reported a significant increase from 52.4 to 53.7 and new orders rose from 51.7 to 52.7.
Elsewhere on the data front, the Markit Manufacturing Purchasing Managersâ Index (PMI) came in at 50.5 in May, down from 52.6 in April. April construction spending was flat; the market had penciled in a 0.4% gain after a 0.1% boost in March.
On Tuesday, ISM will release its non-manufacturing numbers and the Mortgage Bankers Association (MBA) will published mortgage application figures for the week ending May 31. But the big piece of data will be published on Friday when non-farm payrolls for May come out; the market is expecting a gain of 190,000, which would be down from 263,000 in April.
Global markets are deep in the red to start the trading week, driven by the US-led trade war. In the fallout of the US government imposing a 5% tariff on Mexican goods to curb illegal immigration from Central America, investors are pouring into safe-haven assets, which has included the greenback over the last year. That said, since the dollar is front and center in the trade dispute, the safe-haven plays may be found in gold, the Swiss franc, and bonds.
Mexico has admitted that the tariffs would devastate its already fragile economy, but officials have conceded that import levies will not impact illegal crossings from Guatemala and El Salvador. But Mexico may need to contend with tariffs for the next few months because Washington plans to raise tariffs by 5% until October and then install them permanently until the problem of illegal migration.
The USD/CNY currency pair dipped 0.02% to 6.9038, from an opening of 6.9051, at 17:47 GMT on Monday. The USD/MXN surged 0.74% to 19.7668, from an opening of 19.6226.
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