Breaking: US Markit Manufacturing PMI slumps to 36.9 vs. 38 expected

Eren Sengezer FXStreet

The economic activity in the US manufacturing sector is expected to contract at a strong pace in April with the IHS Markit's Manufacturing Purchasing Managers' Index (PMI) slumping to 36.9 in its advanced estimate from 48.5 in March. This reading came in worse than the market expectation of 38.

Further details of the flash report revealed that the Services PMI plunged to 27 from 39.8 and the Composite PMI fell to 27.4 from 40.9.

Commenting on the data, “the COVID-19 outbreak dealt a blow to the US economy of a ferocity not previously seen in recent history during April," said Chris Williamson, Chief Business Economist at the IHS Markit. "The deterioration in the flash PMI numbers indicates a rate of contraction exceeding that seen even at the height of the global financial crisis, with jobs also being slashed at a rate far exceeding anything previously recorded by the survey."

Market reaction

Wall Street's main indexes cling to early gains despite the weak PMI readings. As of writing the S&P 500 and the Nasdaq Composite were both up around 0.8% on the day. Meanwhile, the US Dollar Index continues to trade in a relatively tight range near the 100.50 handle.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

AUD/USD flatlines near 0.6965 as less hawkish RBA counters USD weakness

AUD/USD holds steady above a two-week low, trading near 0.6965 in the Asian session on Wednesday as early midterm election results heighten political uncertainty and weigh heavily on the US Dollar. Moreover, reviving safe-haven demand triggers a fresh leg down in US bond yields, offsetting Fed hike bets and exerting additional pressure on the buck. However, a less hawkish RBA caps the Aussie.

USD/JPY declines below 158.00 as USD weakens on midterm election results

USD/JPY comes under heavy selling pressure on Wednesday, dropping below 158.00 during the Asian session as the US Dollar slumps to a one-month low amid heightened political uncertainty after early US midterm vote counts. Moreover, the prospect of gridlock in Washington drives safe-haven flows, triggering a fresh leg down in US bond yields and further weighing on the buck.

Gold clings to gains near weekly top, comfortably above $4,000 as US elections hit USD

Gold clings to strong intraday gains near the weekly high, trading comfortably above the $4,000 psychological mark during early European session amid a broadly weaker US Dollar. Democrats’ wins in the House and Senate raise the prospect of gridlock in Washington. Moreover, heightened political uncertainty drove investors to safe-haven assets, exerting downward pressure on US bond yields. This is seen weighing on the Greenback and supporting the precious metal.

Bitcoin tests critical support, Ethereum struggles below resistance, XRP extends losses

Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) remain under pressure on Wednesday as bearish momentum continues to weigh on prices. BTC approaches key support around $76,466, and a decisive close below could open the door to deeper losses. Meanwhile, ETH struggles below key resistance while XRP faces rejection at the upper trendline of a falling channel pattern, all hinting at deeper losses.

US Dollar Index dives to late September lows near 101.25 on US election results

The US Dollar Index, which tracks the Greenback against a basket of currencies, comes under intense selling pressure during the Asian session on Wednesday, dropping to its lowest level since late September as early US midterm election results heightened political uncertainty.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.