The main story yesterday was the retreat in Treasury yields, and early today it appeared that way as well. The 10-year Treasury yield dropped to a low of 4.80% before rising to their current level of 4.89%, and the USD followed along with it. The buck continued yesterday’s decline but is now much higher after making a strong bullish reversal earlier.
The highlight of the session was, instead, the euro, which fell sharply during the session on a poor set of PMI data, particularly from Germany and France. Early in the day, the EUR/USD pair traded at 1.0690. Later, it reversed course and touched a low of 1.0623, where it is now hovering around today. The GBP continues to be the worst performance, but risk-taking trades are maintaining yesterday’s turnaround and rising today.
European indexes are staying steady while S&P 500 futures are up 0.5% despite the negative reading for the Eurozone services and manufacturing PMI. The US manufacturing and services sectors seem at a much better shape on the other hand, as they remain in expansion and posted an improvement this month.
Highlights from October Services Reading
- October S&P Global flash services PMI 50.9 points vs 49.8 expected
- The final September reading was 50.1 points
- Manufacturing 50.0 points vs 49.5 expected (prior 49.8)
- Composite index 51.0 points vs 50.2 prior
- Service sector new business fell for a third month running, albeit at a softer pace than seen in September
- Manufacturers registered the fastest rise in new orders in just over a year
Another day, another data point showing surprising strength in the US economy.
Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:
“Hopes of a soft landing for the US economy will be encouraged by the improved situation seen in October. The S&P Global PMI survey has been among the most downbeat economic indicators in recent months, so the upturn in US output growth signalled at the start of the fourth quarter is good news. Future output expectations have also turned up despite rising geopolitical concerns and domestic political tensions, climbing to the joint- highest for nearly one-and-a-half years.
“Sentiment has improved in part due to hopes of interest rates having peaked, something which looks increasingly likely given the further cooling of inflationary pressures witnessed in October. In spite of higher oil prices, firms’ input cost inflation fell sharply to the lowest since October 2020, and average selling prices for goods and services posted the smallest monthly rise since June 2020.
“The survey’s selling price gauge is now close to its pre- pandemic long-run average and consistent with headline inflation dropping close to the Fed’s 2% target in the coming months, something which looks likely to be achieved without output falling into contraction. That said, the tensions in the Middle East pose downside risks to growth and upside risks to inflation, adding fresh uncertainty to the outlook.”
Note the dip in services input inflation here; that’s an area the Fed is watching closely.
Read More:US Manufacturing and Services Improve in October, Leaving Behind Contraction
2023-10-24 16:14:34