ISM PMI data increased from 52.5 to 54.5 in August 2023, significantly exceeding consensus estimates.

The US dollar has gained various forms of support since the beginning of the week. This support stems from worsening global sentiment, increasing US Treasury yields, and the release of upbeat US business services activity data on Wednesday (September 6th). The US Dollar Index (DXY) reached the range of 105.00 at the start of the New York session, marking its highest level since mid-March.

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The Institute for Supply Management (ISM) reported that the Purchasing Managers' Index (PMI) score increased from 52.5 to 54.5 in the US non-manufacturing sector in August 2023. Substantial growth occurred in all subsectors, including employment, new orders, business activity, and prices. Interestingly, the previous consensus had expected no change from the July period.

This positive surprise hasn't altered the expectations for The Fed's interest rates. Market participants still believe that The Fed won't raise interest rates at the upcoming FOMC meeting on September 19-20. However, some investors speculate that PMI data like this could encourage The Fed to maintain higher interest rates for longer.

The "higher for longer" interest rate expectations triggered a decline in US stock markets while boosting US Treasury yields and supporting the USD exchange rate. The Dow Jones Index fell by 0.75% as of the time this news was written, while the Nasdaq Composite dropped by more than 1.0%. Apple's stock experienced the most significant decline as investors rushed to take profits after reports circulated that China had banned its government officials from using iPhones.

US Treasury yields surged from around 4.2600% yesterday to reach 4.300% currently. This increase in yields has contributed to boosting the USD exchange rate against other major currencies. Additionally, the advantage of US interest rates has become more prominent following dovish statements from central bank officials in the UK and Canada tonight.

Bank of England (BoE) Governor Andrew Bailey expressed his intention to end the interest rate hike cycle in his testimony before the British Parliament. In a different part of the world, the Bank of Canada (BoC) policy meeting decided to maintain Canada's benchmark interest rate at 5.0% due to weakening economic growth.