Deutsche Bank analysts note that strong United States (US) Purchasing Managers' Index (PMI) data have reinforced perceptions of economic resilience and rising price pressures, leading markets to scale back expectations for Federal Reserve (Fed) rate cuts. With only a small probability of easing priced by year-end and US yields firmer, this backdrop is broadly supportive for the US Dollar Index (DXY).

US resilience curbs Fed cut pricing

"In fact, the flash composite PMI for April moved up to 52.0 (vs. 50.6 expected), with both the manufacturing (54.0) and services prints (51.3) coming in above expectations, while the subindices also pointed to rising price pressures."

"This saw markets dial down remaining Fed cut pricing, with a cut by year-end now only 20% priced, down from 30% at Wednesday’s close."

"Still, with the cacophony of headlines showing no signs of de-escalation, oil prices held onto most of their gains, while both 2yr (+3.6bps) and 10yr (+2.3bps) US Treasury yields closed higher on the day."

"We have seen some stablisation of these moves overnight, with both S&P 500 futures (-0.06%) and 10yr Treasury yields little changed."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)