U.S. Dollar extends decline after unsatisfactory manufacturing data

The Dollar extended its fall on Wednesday following unsatisfactory manufacturing data, helping the Euro to recover from more than two-year lows. Sterling also rallied, recovering some of Tuesday’s losses after the latest parliamentary attempt to stop a no-deal Brexit.

The Dollar’s pullback was prompted by manufacturing activity in the world’s biggest economy contracting for the first time in 3 years last month. The was shown from the data published by the Institute for Supply Management on Tuesday.

This knocked the wind out of a previously rising Greenback. This also spurred a further bond rally as investors increased bets on more Federal Reserve interest rate cuts before the end of 2019.

The dollar was last down 0.2% against a basket of major currencies, it indexed at 98.803, easing from a two-year high hit on Tuesday.

“Yesterday’s manufacturing survey was very gloomy and confirms that the U.S. is suffering from the global trade and manufacturing downturn, along with everyone else,” said Kit Juckes, currency strategist at Societe Generale.

The Euro rose 0.2% to $1.0992 from $1.0926, touching a 28-month low on Tuesday before the U.S. data was published.

The European single currency wasn’t affected as much by the Euro Zone Purchasing Managers Index composite survey; it came in slightly better than expected.

The safe-haven Yen and Swiss Franc fell as some calm returned to markets. This is owed reports that Hong Kong leader Carrie Lam would announce the formal withdrawal of the Extradition bill that caused months of unrest.

The Yen was down 0.2% at 106.19 Yen per dollar. The Swiss Franc dropped 0.3% versus the Euro to 1.0858 Francs.

The Dollar’s weakness helped China’s offshore Yuan pull away further from record lows plumbed earlier this week. The Yuan was last up 0.3% at 7.1553 Yuan per dollar.

Emerging market currencies were mostly up due to the Dollar weakness, while the Australian and New Zealand Dollars also took advantage of the Greenback’s weakness to rise .

“The expectation that the Fed will come to the rescue has increased,” said Rodrigo Catril, senior FX strategist at National Australia Bank in Sydney.

“But it’s not a capitulation on the dollar. It’s just merely stopped the recent rise of the dollar.”

The British Pound, which on Tuesday fell below $1.20, its weakest in 3 years, rose 0.5% to the day’s high of $1.2157.

Against the Euro it rallied 0.4% to 90.39 pence.

Lawmakers who prevailed over Prime Minister Boris Johnson’s government in a Parliamentary Inquiry on Tuesday are expected to introduce a bill in parliament seeking to stop Britain from leaving the European Union on October 31st without transitional arrangements.

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