Encouraging US Manufacturing Data Could weaken The US Dollar

Published: Wednesday, 2 May 2012 09:00 BST - Written by Minesh Chaudhari

STORY LINK Encouraging US Manufacturing Data Could weaken The US Dollar

After recent data releases, which have point to a pronounced cooling in the rate of economic activity in China, yesterday’s Asian session saw the release of figures which provided some cause for renewed optimism. The Chinese PMI Manufacturing Survey for April registered an expansion in this key sector of the giant Asian economy, for the fifth month in succession.

However, the Chinese data caused only a marginal uptick in global risk sentiment during the European trading session. This meant that the safe-haven US Dollar continued to hold strong against the other majors. However, the Greenback’s resilience was tested by the release of April’s ISM Manufacturing survey yesterday afternoon. The key indicator of American manufacturing activity registered at a healthy 54.8, far above expectations of a 53.0 reading. April’s counterpart figure produced a reading of 53.4, indicating that manufacturing output is on an upward trajectory. The development saw North American equities markets move forward. Ceteris paribus, this should see the Dollar weaken in the near-term, as institutional investors move out of their positions of safety in order to get involved in more rewarding plays.

Today’s session sees the release of whole-of-eurozone employment data for March. Analysts expect the figure to show an increase in the overall level of unemployment in the region from 10.8% in February to 10.9%. If this comes to pass, then fears over the health of the real economy in Europe are likely to increase, piling further pressure on the beleaguered euro and eliciting safe-haven support for the US Dollar and Swiss Franc.

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