US greenback climbs to the highs of the day. 4 issues driving the bid

The US greenback is powerful to begin the week and to grasp why, I believe we have now to return to Friday.

1) ISM manufacturing

At present’s ISM manufacturing survey was on the new facet. The headline rose above expectations and the costs paid element climbed to 55.8 from 52.5. The market actually needs to see some US financial weak point nevertheless it’s onerous to seek out. I’ve written for awhile that manufacturing is on a special observe from providers and that the sector had a recession in 2022-23 and bottomed out round August of final 12 months so I am not shocked however energy is energy.

2) SP World US manufacturing PMI

This report painted the same image to the ISM manufacturing survey. Though it was beneath the 50 mark, the commentary advised pricing stress and that is the alternative of what the market needs to listen to.

3) Powell

That is the massive one. Powell was incrementally extra hawkish on Friday. He did not point out slicing charges this 12 months (although he wasn’t requested) and mentioned the Fed wasn’t in a rush to chop charges. With that, pricing this 12 months is right down to 67 bps from 80 bps after the FOMC.

4) Calendar

It is at all times powerful to place an excessive amount of weight into market strikes on the flip of the calendar. There have been rebalancing flows which will have suppressed yields final week and people could possibly be reversing in the present day as fund managers increase money to spend money on down the chance curve. And it is not simply any month, it is quarter finish plus, Japanese fiscal 12 months finish, and US tax submitting deadlines are approaching. There are many transferring elements in play which might be skewing the image.