After weakening earlier in the session, the US dollar shrugged it off on Friday, as it moved higher against a basket of other major currencies. This was after data showed that there was a decline in the business activity in the US for the first time in almost two years, as manufacturing growth was outweighed by a slowdown in services.

PMI Output Index down

On Friday, S&P Global announced that their preliminary PMI Output Index had recorded higher than expected this month to 47.5, while it had been 52.3 in June. If this reading comes in under 50, it indicates that there is a decline in business activity.

Thus, this data is only going to fuel further debates on whether the US economy is near, or back in a recession, after it had managed to rebound from a downturn that had happened at the start of 2020 due to the COVID-19 pandemic.

The dollar impact

Late on Friday, safe-haven flows gave the US dollar some support, as there was a fall in the appetite of investors for riskier assets. This was because of weak earnings reports resulted in a decline in the value of US indexes.

The dollar had climbed 0.1% higher against a basket of major currencies to reach 106.73. There was a 1.2% decline in the index for the week. According to analysts, the dismal data from the US on Friday was the reason that risk appetite took a hit. It shows that tighter financial conditions are causing problems, as are inflationary pressures that are not coming down.

However, they added that weakness in the US dollar was not expected to last, whenever it happens. Even if there is a slowdown in the US economy, it would only lead to weakness in the medium term only because it is happening everywhere else as well.

Eurozone activity

There was a decline in the eurozone activity because growth in the service sector appears to have stalled and the manufacturing sector is seeing a speedy downturn. This is because consumers are cutting back on expenditure because of rising inflation.

The euro recorded a 0.4% drop against the US dollar to come down to $1.0196. There was also a 0.2% in the British pound against the US dollar, which brought it to $1.1979. This was after data showed that business activity in Britain rose at its slowest pace in July in the previous 17 months. This fanned worries of a slowdown in the British economy, which is dealing with inflation highs of 40 years.

There was a 0.26% decline in the Australian dollar, as it reached $0.6911, while a 0.17% decline in the kiwi brought it to $0.6242. As for the cryptocurrency market, Bitcoin was trading flat for the day at a value of $23,074.82. This put the world’s leading cryptocurrency on course for a rise in 10% in the week. Meanwhile, traders were betting that the downturn that the crypto market had seen recently was finally over.

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