Manufacturing conditions in the New York region continued to show expansion in February, adding to evidence that the economy is chugging along with resilience. The data point casts a cloud on the rate cuts traders have been clamoring for, exerting upward pressure on the dollar.
The US Dollar Index Futures (DX) climbed to the best level in a week, rising as high as 97.46.
State Economy Stays Resilient: The headline business conditions index, indicating manufacturing activity in the New York state, was at 7.1 in February, down from 7.7 in January, with a reading above ‘0’ indicating expansion. Nevertheless, the February data marked the first positive reading in five months. Economists, on average, expected 6.40 for the month.
NY Fed General Business Conditions Index
Source: Federal Reserve Bank of New York
Among the sub-indices:
- New orders edged down 0.8 points, yet remained at a robust 5.8.
- Shipments slumped 17.3 points to -1.0, entering into contraction territory.
- Unfilled orders climbed 17.3 points to 9.1.
- Delivery time improved to 4 from 0.
- Inventories increased to 7.1 from -2.1.
- Prices Paid rose 6.3 points to 49.1.
- Prices Received moved up 7.8 points to 22.2.
- Number of employees jumped 13 points to 4 from -9.0.
- Average employee workweek rose 7.5 points to 2.1.
Outlook Brightens: The index for future business conditions rose four points to 34.7, marking the highest reading since Nov. 2024. The new orders, shipments and employment indices are all expected to rise. More importantly, the capital expenditure (Capex) index climbed eight points to 18.2, marking a multi-year high and underlining the strengthening spending plans of companies.
NY Fed Index of future business conditions
Source: St. Louis Federal Reserve
Rate Outlook: The New York Fed’s regional survey, which gives the first glimpse of manufacturing conditions for February, reinforces the strength relayed by the non-farm payrolls report released last week. The CME FedWatch Tool, which reflects futures traders’ expectation of interest rate trajectory, now shows a 92.1% probability of a status quo decision in March, up from 90.8% on Friday. The red flag in the report is the rise in prices paid, which is a measure of inflation, which coil;d
Go long on the dollar? The Fed staying higher for longer would mean the DX could break out of the recent lackluster phase.
Source: TradingView
The broader technical picture suggests bearishness, with the 50-day simple moving average (SMA) trending below the longer-term 200-day SMA. On the upside, the futures could face resistance around the 98 area, while the derivative instrument has strong support in the 97.10-97.20 zone.
A strong dollar, combined with higher yields will likely exert downward pressure on gold and silver futures.
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