A week has passed under the sign of the weakening of the dollar
Signs of economic activity slowdown in the US
Oil price drop
Unexpectedly weak data on PMI of production and non-production sectors of the U.S. economy have made serious adjustments to the dynamics of the financial market. Fears that the negative impact of the prolonged trade conflict between Beijing and Washington may spread to the United States and lead to a recession in the world's leading economy have increased.
The main driver of the movement in the currency market was the U.S. dollar. At the beginning of the week, the dollar index tested an annual high, but after the publication of disappointing data on PMI production sector (the index fell to the minimum since June 2009), the U.S. currency changed direction downward. Later, weak data on PMI of the non-production sector were published (falling to three-year lows), which strengthened the downward dynamics of the dollar.
Due to the weakening of EUR/USD, which on Tuesday set a new yearly low at 1.0879, it was able to recover its positions quickly enough and rose above 1.1000. Deterioration of macro statistics in the U.S. may force the Fed to further ease its monetary policy. The prospect of reducing the interest rate differential in the EU and the U.S. is a good driver for the growth of the EUR/USD pair, despite weak macro statistics in Europe and increased risks for Brexit.
The pair GBP /USD spent almost the entire week in a fairly narrow price range. Published data on activity in key sectors of the UK economy turned out to be worse than market expected. But investors are still focused on Brexit news. Boris Johnson presented new proposals for the petential agreement on the UK's exit from the EU. The European leader took them rather coldly. According to The Times, Brussels gave Johnson a week to adjust the proposals. Otherwise, they will not be considered at the EU summit, which will take place on October 17-18.
Precious metals market
Early this week, gold updated its two-month low around 1460.00, after which it was able to recover all losses and consolidate above 1500.00. The main growth driver was the U.S. dollar and increased concerns about the prospects for the global economy.
The oil market kept predominantly downward movement during the week. On Thursday, the price updated its two-month low. The pressure on the price was put by the data of the sector statistics from the USA, reports on the production level restoration in Saudi Arabia and the situation on the stock exchanges. Concerns about the possible imbalances in the direction of excess supply are growing, which limits the opportunities for recovery of oil prices.
The main stock indices finished the trading week in the red zone amid growing concerns about the prospects of the global economy. Weak economic statistics from the USA were the driver of decline.