The pair then rebounded modestly, and it is hovering around 134.60/70, down more than 200 pips from Wednesday’s multi-year high. Below 134.40, the next support is seen at 133.80.
Earlier on Thursday, Eurozone PMIs came in below expectations and triggered a rally in European bonds and helped the yen. More recently, the US S&P Global PMI also showed a significant decline in activity. Both the manufacturing and service numbers fell to the lowest level in months at 52.4 (consensus: 56) and 51.6 (53.5), respectively. Despite the worrying data, Wall Street is rising, with the Nasdaq up 1.25% and the S&P 500 climbs 0.63%.
The report added to concerns about the economy and weighed on monetary policy expectations. The US 10-year yield fell to 3.00%, the lowest in two weeks; just on Friday, it was trading near 3.50%, while the 30-year fell to 3.15%.
The US lost momentum across the board after the report. The DXY erased daily gains and pulled back to 104.20/30. The dollar’s losses against the yen are offset by a slide of EUR/USD as German bonds have the best day in years.
Fed Chair Powell is testifying again at Congress. Regarding concerns about the economic outlook, he mentioned is possible to have a strong labor market while curbing inflation. Fed’s Bowman said another 75 bps rate hike will be appropriate in July.