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4 Jun 2013
Flash: US dollar undermined by disappointing US economic data - BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ note that USD has continued to weaken early this week with USD/JPY falling back below the 100.00-level.
He notes that the USD’s recent correction lower accelerated following the release of the weaker than expected ISM manufacturing report for May. Hardman adds that the report revealed that business confidence in the manufacturing sector declined to its lowest level since June 2009 driven by weakness in production and new orders sub-components. Further, he sees that the report is consistent with the US economy losing momentum in Q2 as the drag from fiscal tightening increases alongside weakening global growth.
However, he writes, “Value added by the manufacturing sector only accounts for around 12.0% of GDP with sector adding only around 8.0% of new jobs since early 2010, the ISM manufacturing survey reading likely exaggerates the scale of the slowdown in the overall economy.” He feels that the release of the ISM non-manufacturing survey and non-farm payrolls reports for May later this week will be important to assess how the bulk of the economy is performing, and the sharp sell for the US dollar following the release of the weaker than expected ISM manufacturing yesterday provided a strong signal that long US dollar positioning is elevated in the near-term driven by expectations that the Fed will begin tapering QE by September.
He notes that the USD’s recent correction lower accelerated following the release of the weaker than expected ISM manufacturing report for May. Hardman adds that the report revealed that business confidence in the manufacturing sector declined to its lowest level since June 2009 driven by weakness in production and new orders sub-components. Further, he sees that the report is consistent with the US economy losing momentum in Q2 as the drag from fiscal tightening increases alongside weakening global growth.
However, he writes, “Value added by the manufacturing sector only accounts for around 12.0% of GDP with sector adding only around 8.0% of new jobs since early 2010, the ISM manufacturing survey reading likely exaggerates the scale of the slowdown in the overall economy.” He feels that the release of the ISM non-manufacturing survey and non-farm payrolls reports for May later this week will be important to assess how the bulk of the economy is performing, and the sharp sell for the US dollar following the release of the weaker than expected ISM manufacturing yesterday provided a strong signal that long US dollar positioning is elevated in the near-term driven by expectations that the Fed will begin tapering QE by September.