The dollar index (DXY00) on Thursday fell -0.74% and posted a 1-week low. A decline in T-note yields Thursday undercut the dollar. The dollar also came under pressure after the May ISM manufacturing index contracted more than expected, which was dovish for Fed policy. In addition, the action by the House to pass the debt ceiling agreement sparked a rally in stocks that curbed the liquidity demand for the dollar.
Thursday’s U.S. economic news was mixed for the dollar. On the bearish side, the May ISM manufacturing index fell -0.2 to 46.9, slightly weaker than expectations of 47.0. Also, the May ISM prices paid sub-index fell -9.0 to a 5-month low of 44.2, a bigger decline than expectations of 52.3. On the bullish side, May ADP employment change rose +278,000, stronger than expectations of +170,000. Also, weekly initial unemployment claims rose +2,000 to 232,000, showing a stronger labor market than expectations of 235,000.
