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Peter Davis

An writer at FOMOdrive

  • Aug 28, 2023
  • 2 min read

The US dollar rose sharply after the news from Germany

After very weak data on Germany was released, the dollar experienced a sharp rise.

The dollar index has reached its highest level in 2.5 months and is nearing 104.

The euro is on the brink of breaching the $1.08 mark for the first time since the middle of June.

The price of the American currency is increasing in anticipation of the gathering of the world's leading central bank governors in Jackson Hole, beginning on Thursday.

On Wednesday, the dollar rose significantly following the release of weak data from Germany. The provisional PMI index in the service sector for August dropped below the 50-point mark, which indicates a decrease in economic activity, for the first time this year.

Although the PMI index in the manufacturing sector in Germany is slightly higher than anticipated, it is still close to the lowest levels since the crisis in May 2020, with a value of less than 40 points.

In August, the composite European PMI index in the services sector dropped below 50 points for the first time since December of the previous year.

Given the current situation, the market is uncertain if the European economy's fragility will permit the ECB to increase interest rates in the foreseeable future.

PMI indices for the UK were significantly worse than anticipated. Activity in the manufacturing sector dropped to its lowest point since May 2020, and activity in the service sector fell below 50 pp for the first time since January.

ING notes that the next support for the EUR/USD pair is expected at 1.08, and markets may remain bearish in positioning ahead of Jackson Hole.

UOB has predicted that EUR/USD could go below 1.08, while RBC has warned of the potential for a further decrease in the rate, following the downward trend seen in July and August.

According to Goldman Sachs, the dollar will remain strong until there is an increase in economic growth in Europe and Asia.

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