The US Dollar is trading higher today as stocks come under pressure on the back of weak US data yesterday and a ratings downgrade from Fitch. On the data front, the US ISM manufacturing PMI was seen printing 46.4, below the 46.9 the market was looking for. Meanwhile the ISM prices index printed 42.6, below the 43.8 the market was looking for. Finally, the JOLTS job openings number printed 9.58 million, below the 9.61 million the market was looking for.

Fitch Downgrades US Credit Rating

The data itself, while disappointing, likely wouldn’t have been enough to send stocks lower. However, news yesterday that credit ratings agency Fitch has downgraded the US’ sovereign rating to AA+ from AAA. Fitch cited ballooning fiscal deficits as the reason behind the downgrade, noting also “ an erosion of governance” which has resulted in concerning clashes over the US debt limit. Fitch said that tax cuts, spending drives and large-scale economic shocks had seen the US budget swelling to a troubling level.

The news has seen US stocks falling, reflecting a loss of risk appetite into the middle of the week. Meanwhile, US treasuries and USD have been higher, driven by increased safe-haven demand. Looking ahead today, focus will be on the US ADP employment number, forecast at 191k from 497k.

Technical Views

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The recovery in the DXY off the 99.46 lows has seen the market breaking back above the 101.22 level. This is a key pivot for the index and while above here, the focus is on a further push higher. The bearish trend line is the next resistance area to note, ahead of bigger resistance at the 103.48 level. 

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