The US manufacturing sector is still in contraction zone. * Pay attention to Powell’s address from the Fed. * The US rate futures price indicates a 56% possibility of a rate decrease in March. (Updates prices; adds new remark, bullets, byline, NEW YORK dateline, and FX table.) Written by Gertrude Chavez-Dreyfuss and Iain Withers December 1, London/New York (Reuters) – On Friday, the dollar gained ground for the third day in a row as the euro continued its sharp overnight losses as traders anticipated a speech by US Federal Reserve Chair Jerome Powell later in the day. However, the dollar lost ground as statistics revealed that November’s manufacturing in the United States remained poor. The manufacturing PMI, according to the Institute for Supply Management (ISM), remained at 46.7 last month.
The PMI remained below 50 for the thirteenth straight month, a sign of a manufacturing downturn. According to the CME’s FedWatch tool, U.S. rate futures priced in a 56% likelihood of a rate drop by the March meeting next year on Friday, compared to 43% late on Thursday, after manufacturing data. The likelihood of a rate decrease in the US increased to 84% for the May meeting from about 76% the day before. More traders bet for quicker rate reduction in 2019 as a result of softer inflation statistics released on Thursday in the US and the EU, which supported thoughts that both central banks may have finished raising interest rates in their fight against price increases.
Contrary to its prior prediction that it would happen in the third quarter of 2024, Goldman Sachs said on Friday that it now anticipated the European Central Bank to announce its first rate drop in the second quarter of 2024. Investors will be watching for any hints about the future direction of interest rates in the United States from a speech that Fed member Powell is scheduled to make later on Friday. According to Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull in Toronto, “that would be the Fed’s last opportunity to set the record straight for the meeting before the blackout period.” “So I think you’re just seeing a paring back of post-CPI (consumer price index) decline in the dollar.”
According to experts, month-end trading on Thursday contributed to larger fluctuations in currency movements, which were more restrained on Friday. The U.S. dollar index, which measures the dollar against six major rivals, was up 0.2% at 103.69 as of last week. In November, the index recorded its worst monthly performance in a year. A poll indicating a decline in industrial output in the euro zone slowed somewhat last month but remained sharply negative suggests that mixed economic data across Europe failed to set the tone for the euro. The manufacturing sector in Britain saw a decline as well, albeit an improvement for the third consecutive month.
At $1.0842, the euro saw a 0.4% decline, but sterling remained unchanged at $1.2617. The dollar fell 0.1% vs the yen to 148.09 yen. The yen had advanced for the third week in a row, moving away from the almost 33-year low of 151.92 per dollar that was briefly seen in mid-November. The Asian currency has risen in recent weeks due to growing anticipation that the Bank of Japan would end its ultra-easy monetary policy next year and a decline in U.S. rates. Among cryptocurrencies, bitcoin kept becoming stronger and reached a new all-time high of $38,839, marking 18 months. At $38,401, it was up 1.9% as of late.