Market Highlight 04.06.2024

The USD Index fell to its lowest level in three weeks (104 points) yesterday after weaker-than-expected manufacturing and construction spending data indicated that the U.S. economy is slowing. The U.S. manufacturing PMI dropped to 48,7 points in May, down from 49,2 points in April. Thus, the U.S. manufacturing sector has recorded a decline for 18 out of the past 19 months. The U.S. construction spending also unexpectedly fell for the second consecutive month in April by a 0,1% decline following a 0,2% decrease in March. Increasing warning signs suggest that the FED's maintenance of a high-interest-rate environment is slowing the U.S. economy. The market is now anticipating that the FED will only implement one rate cut this year, with a 60% probability for this to occur at the September policy meeting after last night's data.
In contrast, manufacturing activity in the Asian region has shown positive improvements in many major production centers such as South Korea, Taiwan, Indonesia, and Vietnam, with overall PMI in many countries reaching the highest levels in the past two years. Increasing domestic and foreign demand has boosted capacity and new orders in this region. However, rising input costs (wages, raw material costs) have kept inflation from cooling in the area. This limits the prospects for interest rate cuts in Asia, as major central banks around the world, including Europe, Canada, and the U.S., may start cutting rates in the second half of this year.
The USD/VND interbank exchange rate at times fell close to 25.400 yesterday before rebounding to 25.440 which closely following the inflows and outflows of foreign currencies in the market during the day. The downward trend is expected to continue today, and if the 25.400 level is not maintained, there could be sessions with strong downward adjustments in the exchange rate in the near future. The short-term target level for the exchange rate could be around 25.300.

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