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Dollar climbs as PMI beats and tariff tensions rise
The ISM Manufacturing PMI beat expectations, boosting the dollar as markets focus on economic data, tariff threats, and upcoming central bank meetings.
The ISM Manufacturing PMI rose to 48.4 in November, beating forecasts of 47.5
The dollar index climbed above 106.5, supported by U.S. economic strength
Oil prices held steady at $68.1 as traders await the OPEC+ meeting
BoJ Governor Ueda signaled a rate hike is approaching but gave no timeline
ISM manufacturing PMI surprises, Dollar rises amid tariff threats and economic optimism
The U.S. manufacturing sector showed signs of improvement in November, with the ISM Manufacturing PMI rising to 48.4 from October's 46.5, surpassing expectations of 47.5. While the reading still reflects a contraction, the softer decline points to resilience, driven by a rebound in new orders after seven months of contraction. Production, employment, and inventories also contracted less sharply than before, suggesting a tentative stabilization.
The dollar gained ground, with the dollar index climbing above 106.5, extending its upward trajectory. Investors are keenly watching a slate of U.S. labor market data this week, including Tuesday's JOLTs report, Thursday’s initial jobless claims, and Friday's critical nonfarm payrolls report, to gauge the Federal Reserve’s policy path. Adding to the dollar's momentum was President-elect Donald Trump’s weekend warning of 100% tariffs on BRICS nations should they move to challenge the dollar as the global reserve currency. The Chinese yuan, particularly, faced pressure amid these heightened concerns.
Oil markets brace for OPEC+ meeting
WTI crude oil prices hovered around $68.1 per barrel on Tuesday as markets anticipated Thursday’s OPEC+ meeting. The alliance is expected to extend its production restraint for the third consecutive time, addressing fears of an oversupplied market in 2024.
ECB’s Kazaks hints at rate cuts amid easing inflation
Martins Kazaks, a member of the European Central Bank's Governing Council, suggested support for an interest rate cut at the ECB's next meeting, citing expectations that Europe’s inflation challenges are nearing their end. However, Kazaks acknowledged lingering uncertainties, including the impact of Trump’s potential tariff measures on Europe’s economy. Despite these risks, Kazaks struck a cautiously optimistic tone, noting that the Eurozone is beginning to recover from its economic low point.
BoJ governor signals looming rate hike
Bank of Japan Governor Kazuo Ueda indicated that an interest rate hike could be approaching, marking a potential shift in the central bank’s ultra-loose monetary policy. In an interview, Ueda said the data shows progress toward the 2% inflation target, though he expressed concern about the yen’s persistent weakness. The BoJ's next rate decision on December 19 remains pivotal, with markets pricing in a 60% probability of a hike, though some expect action could be deferred to January.
As markets navigate these economic and political developments, investor focus remains fixed on labor data, central bank signals, and the potential for renewed tariff disputes to reshape global trade dynamics.
