The US dollar fell for the second day in a row. The ISM Manufacturing PMI slowed from 58.8 to 57.6, while Fed officials showed a wary stance on the Rate Hike.
The US dollar weakened from a 19-month high due to US economic data that did not meet expectations, as well as the Fed's slackening aggressiveness in planning interest rate hikes. At press time on Wednesday (02/February) morning, the Dollar Index was down 0.40% to 96.25.
The US ISM Manufacturing PMI fell from 58.8 to 57.6 in January 2022, slightly better than the estimated decline to 57.4. Although still in the expansion category, the manufacturing index this time was the lowest on record since November 2020.
According to Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, the limited manufacturing production in January was caused by the outbreak of the Omicron COVID variant infection and supply chain problems.
Factories do work because demand is high. However, their material input is limited. The surge in Omicron infections also affects the absenteeism of workers. Nevertheless, Fiore is optimistic that manufacturing will continue to improve in the future.
"The US manufacturing sector is still experiencing high demand constraints constrained by supply chains. However, January was the third month in a row with indications of improving labor resources and supplier delivery performance," Fiore said.
Even if interest rates rise, Fed officials are wary
Meanwhile, Fed officials began to give cautious comments after the announcement of monetary policy last January. A rate hike in March is almost certain, but they also warn of possible repercussions. Therefore, they remain open to any options amidst the uncertainty of the current inflation outlook.
"We are indeed heading for an increase (interest rates) in March. However, after that, I want to see the data that will be released ... let's see developments on Omicron, we'll just watch, then we'll see the results," said the President of the San Fed. Francisco, Mary Daly.
Similar comments were also expressed by the President of the Richmond Fed, Thomas Barkin. "I'm glad we're going into a better position. A better position would be one that's closer to neutral, of course, than our current (position). I think the pace of getting there will depend on the rate of inflation," Barkin said.
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