US Dollar, US PMIs, Russia, Ukraine – Talking Points
- US ISM Feb Manufacturing PMI 58.6 Vs Jan 57.6
- USD continues to gain, Dollar Index back above 97
- US Dollar benefitting from safe haven flows and strong data
The US manufacturing sector continued to strengthen in February, with the ISM Manufacturing survey coming in at 58.6. This reading surpasses both the January print of 57.6, and the consensus forecast of 58.0. Improving factory activity could be coming as a result of strong demand and easing of supply bottlenecks, which would be welcomed by Fed Chair Jerome Powell and fellow policymakers.
US Economic Calendar
Courtesy of the DailyFX Economic Calendar
The report revealed that manufacturers reported a sharp increase in new orders, which spurred production. Strong sales growth pushed firms to hire new workers as well as increase stocks of purchases. Despite this, the report continued to cite supply bottlenecks as an area of major concern for manufacturers. Labor shortages and bottlenecks for raw materials continue to weigh on capacity, but these issues are continuing to ease according to the survey.
The strong ISM print gave the US Dollar an additional tailwind, with the Greenback already benefitting from safe-haven flows. The US Dollar Index had traded back through the key 97 level prior to the report as Russia-Ukraine tensions continue to grow. The US Dollar may continue to benefit as market participants look to safety in a time of geopolitical uncertainty.
US Dollar Index 1 Hour Chart
Chart created with TradingView
Perhaps lost on traders is the close proximity of the March FOMC meeting, given the magnitude and severity of the events unfolding in Eastern Europe. Markets are currently forecasting a rate hike of 25 basis points (bps), as traders have quickly reversed course on a potential 50 bps hike given the shift(s) in the macro landscape. The combination of a rate hike and continued safe-haven flows could continue to benefit the US Dollar, keeping it elevated at or around yearly highs.
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— Written by Brendan Fagan, Intern
To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter