Dollar Rebounds as Markets Await Key Economic Data

The USD recovered ground after a sluggish start to the week, with US markets closed for the Labor Day holiday. Investor sentiment improved as trading resumed, buoyed by anticipation of upcoming economic releases. Key data points this week include manufacturing figures on Tuesday, services sector data on Thursday, and the closely watched non-farm payrolls report on Friday. Market participants caution that the dollar’s trajectory remains uncertain, with potential Federal Reserve interest rate cuts and significant macroeconomic indicators on the horizon.?

Pound Buoyed by Robust UK Manufacturing PMI

Sterling gained momentum following the release of the UK’s latest manufacturing PMI, which showed factory sector growth reaching a two-year high in August. Market attention now turns to Bank of England (BoE) Deputy Governor Sarah Breeden’s scheduled public address later today, which could influence currency movements. In the absence of key UK data, sterlin’s performance is likely to be driven by broader market sentiment.?

Euro Strengthens on Manufacturing PMI

The euro strengthened against major peers following the CPI announcement, fuelling speculation that the European Central Bank (ECB) may cut interest rates in September. Market sentiment favours a European Central Bank rate cut, but the common currency’s gains may be limited by a lack of significant economic releases from the bloc this week. Furthermore, the negative correlation with the US dollar can further dampen its performance if the greenback continues to strengthen.

Canadian Dollar Weakens Ahead of BoC Rate Decision

The Canadian dollar declined in anticipation of the Bank of Canada's upcoming monetary policy decision. With Canadian markets closed on Monday for a public holiday, the loonie was exposed to selling pressure driven by market expectations. The decline in commodity-linked CAD is likely to be mitigated by rising crude oil prices. Investors will closely monitor both the BoC's interest rate decision and a oil price trends for direction.

Japanese Yen Rises Due to Hawkish BoJ

The Japanese Yen experienced volatility following the release of mixed weak manufacturing data and fuelled speculations around the Bank of Japan's upcoming monetary policies. August’s Manufacturing PMI edged up to 49.8 from 49.5, while core CPI rose to 1.6% year-on-year, surpassing the previous 1.5%. The government’s announcement of a ￥989 billion energy subsidy package aimed at curbing inflation and easing cost-of-living pressures, added to market uncertainty. JPY movements remain sensitive to shifts in USD momentum.

Australian Dollar Struggles Ahead of ISM Manufacturing PMI

The Australian dollar faced downward pressure as markets awaited the release of US ISM Manufacturing PMI data. While traders observe Australia's Q2 Gross Domestic Product and July Trade Balance data, the upcoming speech by Reserve Bank of Australia Governor Michele Bullock may further influence the AUD. Additionally, the US Federal Reserve’s policy outlook may significantly affect the AUD.??

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