The US PMI preliminary figures for August announced the day before showed a particularly sharp decline in the non-manufacturing sector. At 44.1, it was the second lowest since the pandemic hit in the first half of 2020. In addition, the number of newly built homes sold in the US in July decreased by 12.6% from the previous month to 511,000 (annualized rate). In both cases, the adverse effects of high inflation have surfaced.
Despite growing concerns about an economic recession, the market expects the US Fed to continue its aggressive stance of raising interest rates in order to curb inflation. There seems to be speculation that the worse the numbers, the faster rate hikes will have to be. U.S. bond yields have continued their upward trend. Although it reacts to the strength and weakness of the US index and the trend of the stock market, which are announced one by one, the upward trend is persistent. The 10-year US Treasury yield, which hit 2.51% in early August, climbed to 3.07% yesterday.
According to CME FedWatch, which shows the rate of interest rate hikes in the short-term financial markets, the outlook for the September FOMC meeting is 52.0% for a 50bp hike and 48.0% for a 75bp hike. Both are fluctuating between 40% and 60% like a seesaw, but there is no change in the overall view that it cannot be said either way. Fed Chairman Jerome Powell’s speech on Friday is expected to give the market a clear direction.
Economic indicators to be announced in overseas markets after this are the South African consumer price index (July), the US MBA mortgage application index (08/13 – 08/19), US durable goods orders (preliminary figures) (July ), U.S. pre-owned home sales contract index (July), etc.
Yesterday, the deterioration of the US PMI led to a large sell-off in the USD, but the sell-off has not continued as expected. As US economic indicators come out every day, it is assumed that the market will continue to be affected by these numbers.
Watch how the USD moves after tonight’s US durable goods orders (preliminary figures) (July) and US pre-owned home sales index (July).