The greenback rallied across the board to a ner 20-year high on Friday as selloff in global equites and risibg U.S. yields triggered risk-aversion. Elsewhere, sterling tumbled to fresh 37-year lows on market's negative reaction to UK's mini budget measures.
On the data front, Reuters reported U.S. business activity contracted for a third straight month in September, though the pace of decline slowed while improving global supply chains eased inflation pressures for companies. S&P Global said on Friday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, rose to 49.3 this month from a final reading of 44.6 in August.
A reading below 50 indicates contraction in the private sector. Discounting the slump during the first wave of the COVID-19 pandemic in the spring of 2020, business output in the third quarter was the weakest since the 2007-2009 global financial crisis.
Versus the Japanese yen, dollar found renewed buying at 141.77 in Asian morning and gained to 143.26 in European morning on usd's broad-based rebound. The pair then retreated to 142.38 on profit-taking before extending intra-day gain on continued usd's strength to 143.46.
The single currency remained under pressure in Asia and tumbled to 0.9737 in European morning after release of weak EU PMI data before staging a short-covering rebound to 0.9775 due partly to cross-buying of euro especially vs sterling. However, the pair later tumbled to a fresh 20-year trough at 9669 in New York afternoon on broad-based usd's rally.
More from Reuters, the downturn in business activity across the euro zone deepened this month and the economy is likely entering a recession as consumers rein in spending amid a cost of living crisis, a survey showed on Friday. The services PMI fell to 48.9 from 49.8, its second month sub-50 and the lowest reading since February 2021. The Reuters poll had predicted a more modest fall to 49.0.
Manufacturers also had a worse month than predicted. Their PMI sank to 48.5 from 49.6, compared to the 48.7 forecast in the Reuters poll and the lowest since June 2020. An index measuring output, which feeds into the composite PMI, nudged down to 46.2 from 46.5.
The British pound also remained under pressure in Asia and fell to 1.1021 in European morning after announcement of UK mini budget. Cable then staged a short-covering rebound to 1.1096 in New York morning before tanking to a fresh 37-year trough at 1.0840 on broad-based selloff in sterling.
Reuters reported Britain's new finance minister Kwasi Kwarteng said on Friday he would scrap the country's higher rate of income tax and cut the basic rate from April next year, as he set out a mini-budget designed to spur economic growth. Kwarteng said from April 2023 Britain would have a single higher rate of income tax of 40 per cent. He also said he would cut the basic rate of income tax to 19 pence in April 2023, one year earlier than expected. "That means a tax cut for over 31 million people in just a few months' time," he told parliament.
Data to be released this week :
New Zealand market holiday, Japan Jibun bank manufacturing PMI, Jibun bank services PMI, Germany Ifo business cliamte, Ifo current conditions, Ifo expectations, U.S. national activity index and Dallas Fed manufacturing business index on Monday.
Italy trade balance non-EU, U.S. building permits, durable goods, durables ex-transport, durables ex-defense, redbook, monthly home price, consumer confidence, new home sales and Richmond Fed manufacturing on Tuesday.
U.K. BRC shop price index, Australia retail sales, Japan coincident index, leading index, Germany Gfk consumer confidence, France consumer confidence, Italy business confidence, consumer confidence, industrial sales, U.S. MBA mortgage application, goods trade balance, wholesale inventories and pending home sales on Wednesday.
Italy producer prices, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer confidence, Germany CPI, U.S. GDP, PCE prices, initial jobless claims, continuing jobless claims, Canada GDP and average weekly earnings on Thursday.
New Zealand building permits, Japan unemployment rate, industrial output, retail sales, consumer confidence, construction orders, housing starts, China NBS manufacturing PMI, caixin manufacturing PMI, Germany import prices, retail sales, unemployment change, unemployment rate, U.K. current account, GDP, nationwide house prices, Swiss retail sales, KOF indicator, France CPI, consumer spending, producer prices, Italy unemployment rate, CPI, EU HICP, unemployment rate, U.S. personal spending, personal income, core PCE price index, Chicago PMI, University of Michigan sentiment and Canada budget balance on Friday.
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