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US PMI Disappoints

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Markit Economics have had a busy morning publishing a mixed bag of Eurozone Purchasing Managers Indices (PMI). Attention now turns to the US where they have just released the Manufacturing PMI number for March, at 55.5 this is a small degree worse than the February number of 57.1 and also lower than the consensus estimates of 56.5.

The US Manufacturing PMI is considered an important monthly data point due to the dominance of manufacturing in much of the US economy. Fortunately the US has a mature industrial sector that has historically proven resilient to economic downturns, the US PMI number seldom falls below the key 50 level which marks the difference between contraction and expansion of this indicator.

The recovery in the US is gradually beginning to translate into a pick up in the US Dollar. The Dollar Index (DXY) has finally recovered from it’s 12 month low of 0.79 and has found a new short term base around the key 0.80 level. Although further progress is being hampered by resistance at the 50 day moving average, there does appear to be sufficient bullishness towards the Dollar to enable it mount a credible challenge to this line.

Also in the Dollars favor is the fact that both the Euro and Sterling look like they are running out of steam. EURUSD has bumped into strong and descending resistance at $1.3966, this pair no longer looks like it will be able to make a viable assault on the key $1.40 level any time soon, this is particularly the case since the European Central Bank announced it’s concern over the strengthening of the single currency.

Likewise, Sterling earlier this month appeared set to break through the $1.68 benchmark level. Dollar buyers however are winning this round, Cable has been undergoing a sell off over the past week as investors are now turning to favor the US Dollar.

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