Forex »

US (Dallas) Manufacturing Index Improves

Finances
Share on StockTwits
Published on
www.finances.com
US (Dallas) Manufacturing Index Improves

The Federal Reserve Bank of Dallas has just released the April version of it’s respected Manufacturing Index. Although specific to Texas this indicator is a good proxy measure of output, employment, prices and orders in the overall US manufacturing sector. This months reading is higher at 11.7, up from the 4.9 reported in March.

US economic data readings have, with the odd exception, been consistently positive over much of the last quarter, particularly the latter part. This however is failing to translate into demand for the US Dollar, the benchmark Dollar Index (DXY) has been in a downward trend for the past 12 months and appears to have flat-lined in the 79 to 80 range.

A partial explanation for recent Dollar selling, particularly against the Euro, is that as the US Fed unwinds it’s quantitative easing program and the European Central Bank becomes set to embark on one of it’s own, investors are buying up new European bond issues at the expense of US treasuries.

This however is just the latest in a series of short term explanations for the Dollars inactivity, the past year has seen geopolitical tensions, commodity sell offs and emerging market turmoil being offered as potential reasons for the lack of US Dollar appreciation.

The true cause of the Dollars failure to rise during this US economic recovery is likely to lie two other factors. Firstly, the Federal Reserve is being considered as a safe pair of hands and this is translating into stability in the nations currency, it is true that the Fed is consistently fine tuning it’s monetary stance but so far these adjustments are being treated as both responsive and positive. Secondly, it has to be noted that the stability that the Dollar has found in this 79 to 80 range of the DXY is in fact right at the long term average of this index. This settling down of the currency reflects the return to the gradual and stable growth path expected from this mature economy.

Share on StockTwits