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US Dollar Firms on Solid PMI Data as Stimulus Hope Fades

US Dollar Firms on Solid PMI Data as Stimulus Hope Fades

2020-10-23 14:00:00
Rich Dvorak, Analyst
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USD PRICE OUTLOOK: US DOLLAR ADVANCES FOLLOWING MARKIT PMI DATA & STIMULUS REMARKS

  • US Dollar attempts to claw back lost ground and turn positive on the day following PMI data
  • An uptick in US Dollar strength looks most notable against the EUR, CAD, and AUD
  • A breakdown in fiscal stimulus negotiations could exacerbate USD buying pressure
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The US Dollar is perking up during Friday trade shortly after the New York opening bell. An overall solid PMI report just released by IHS Markit looks like a potential driver of returning US Dollar strength. Although the manufacturing component slightly missed market consensus, it still improved sequentially, and business activity across the services sector showed a marked gain for October. This likely boosts US economic growth trajectory on the back of solid momentum headed into 4Q-2020.

IHS MARKIT PMI REPORT (OCT) - DAILYFX ECONOMIC CALENDAR

US Markit PMI Flash October 2020 Chart

Chart Source: DailyFX Economic Calendar

The Markit PMI report for October highlighted how business confidence increased notably for both manufacturing and service sectors. Although, optimism was said to stem from firms becoming “increasingly positive about prospects for the coming year amid hopes for renewed stimulus, COVID-19 containment measures gradually easing, and greater certainty for businesses and households after the presidential election.”

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US DOLLAR INDEX PRICE CHART: 15-MINUTE TIME FRAME (22 OCT TO 23 OCT 2020)

US Dollar Index Price Chart

Chart by @RichDvorakFX created using TradingView

That said, the latest fiscal stimulus headlines from key US politicians seem to have poured cold water on expectations for a stimulus deal before the November 2020 election. White House economic advisor Larry Kudlow stated that “the ball is not moving much on stimulus relief” this morning, which is a less-hopeful tone than conveyed previously.

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This likely stands as a larger driver of the US Dollar’s intraday advance off session lows, which could continue while odds of a comprehensive aid package passing congress before the election quickly dwindle. US Dollar perkiness this morning following the stimulus headlines and Markit PMI data looks most notable across EUR/USD, USD/CAD, and AUD/USD.

Keep Reading: US Dollar (USD) Presidential Election Performance May Prove Anything but Typical

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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