Greenback dips on weak PMI figures, traders adjust Fed rate cuts expectations

The US economic calendar featured the release of the S&P Global Services PMI, followed by the Institute for Supply Management (ISM) PMI. The former rose to 52.3, below January 52.5, while the Composite PMI, which encompasses manufacturing and services activity, was 53.8, missing estimates and the previous reading of 54.2.

Lately, the ISM Services PMI stood at 52.6, down from 53.4 and below the consensus of 53, triggering a downward reaction on the US Dollar. The US Dollar Index (DXY), which tracks the performance of six currencies against the buck, dropped to an eight-day low of 103.58 on the release. Yet, it has paired some of its losses but remains negative at 103.69, down 0.13%.

Across the pond, the Eurozone (EU) HCOB Flash PMIs for Services and Composite were released. The Services Index rose 50.2, above expectations of 50.0, while the Composite improved to 49.2 from the 48.9 expected. Although the data suggests the EU’s economy is improving, downside risks remain. Even though the data was mixed, the EUR/USD failed to gain steam as traders await the European Central Bank (ECB) decision on Thursday.

Given the fundamental backdrop, the Federal Reserve’s (Fed) rate cut expectations continued to adjust. Data from the Chicago Board of Trade (CBOT) shows traders estimate 99 basis points (bps) of easing toward the end of 2024.