Forex Signal Bullish | DXY |

The US dollar index (DXY) edged down on Wednesday after a near-stalling of business activity in August raised doubts over the strength of US economic growth in the third quarter.

The flash US Composite PMI declined to 50.4 in August, the weakest upturn in activity since February and below market expectations of 52. A reading below 50 indicates contraction.

The manufacturing sector contracted for the third consecutive month, with the flash manufacturing PMI falling to 47.5 in August, the lowest level since June 2020. The service sector also slowed, with the flash service PMI falling to 51.6 in August, the lowest level since January


The weak PMI data weighed on the dollar, which fell against most major currencies. The euro rose to its highest level in nearly two months, while the British pound fell to its lowest level since mid-June.

The Federal Reserve is expected to keep interest rates unchanged at its meeting on Wednesday, but investors will be looking for clues on the central bank’s plans for future rate hikes. Fed Chair Jerome Powell is scheduled to speak at the central bank’s annual symposium in Jackson Hole, Wyoming, on Friday.

The weak PMI data and cautious sentiment ahead of Powell’s speech are likely to keep the dollar under pressure in the near term.

However, there are some factors that could support the dollar in the coming months.

First, the US economy is still growing, albeit at a slower pace. Second, the Federal Reserve is likely to continue to raise interest rates, which could make the dollar more attractive to investors. Third, the US dollar is seen as a safe haven currency during times of uncertainty, which could boost its demand in the event of a global recession.

Overall, the outlook for the US dollar is mixed. The weak PMI data could weigh on the currency in the near term, but the underlying fundamentals of the US economy are still strong. The Federal Reserve’s monetary policy stance and global economic conditions will also play a role in determining the dollar’s direction in the coming months.