U.S. Dollar Flat After Disappointing PMI Data

The U.S. dollar dipped on Thursday before recovering after data showed a decline in the manufacturing and services sector as businesses remain wary about the health of the U.S. economy.

But another inversion in the 10-year to 2-year Treasury yield curve this morning put pressure on the greenback and sank an early rally in equities.

The IHS manufacturing PMI for August came in at 49.9 versus an estimate of 50.5, while the services PMI for August was at 50.9 compared to expectations of 52.8.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.02 to 98.28 as of 10:48 AM ET (14:48 GMT) after reaching an earlier low of 97.993.

Traders were also focused on comments from Federal Reserve members at the central banks annual meeting in Jackson Hole, Wyo. The meeting minutes from the Fed’s July meeting showed the FOMC saw the quarter-point cut more as a recalibration of policy rather than the start of steady cuts, but another cut in the September meeting is still forecasted by the markets.

The Japanese yen, which is seen as a safe-haven in times of market turmoil, rose with USD/JPY falling 0.1% to 106.51.

Sterling recovered after German Chancellor Angela Merkel said it was possible a solution to the Irish backstop could be found before the U.K. leaves the European Union on Oct. 31.

The pound fell earlier this week after U.K. Prime Minister Boris Johnson demanded that the backstop be removed from the divorce deal. The backstop agreement is an insurance policy to keep the Irish border open after Britain leaves the EU.

GBP/USD jumped 1% to 1.2239, while EUR/USD was flat at 1.1077.forex.com

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