US PMIs surge and yields hit their highest since 2007

A jump in US business activity pushed Treasury yields to their highest since 2007 and lifted the dollar to a two-month high, while silver tumbled 3.67% and gold fell over 1.5%.

US data reset the session

• S&P Global's flash PMI readings for September came in at 57.0 for manufacturing and 58.7 for services, both well above forecasts — a 52-month high for manufacturing and a 59-month high for services, with the composite at 58.4, its best in 62 months.
• Treasury yields soared on the data, with the 10-year reaching its highest level since July 2007.
• Federal Reserve Governor Michael Barr said the central bank will likely need to raise interest rates further for a timely return to the 2% inflation target, adding that the Fed had been "out of position" and that last week's hike was an adjustment "in the right direction". FXStreet attributed the day's hawkish repricing to remarks from several Fed officials, not to Barr alone.

The dollar's move, pair by pair

• The US Dollar Index hit a fresh two-month high, its third consecutive day of gains, clearing the 100.32 level that had capped it.
• The Japanese Yen fell for a fourth straight day, pushing USD/JPY to a three-week high around 158.18, up 0.50%. The market is still watching for intervention after Action Forex cited reports that the Bank of Japan had run rate checks with major banks.
• The Euro fell to its lowest since late July, trading near 1.1401 in the US session after breaking through the 1.1425 low it had set in Asia. UOB analysts, in a note during the session, saw a downside bias toward 1.1400.
• Sterling cracked, down over 0.70% at 1.3253, its lowest since 1 July after peaking at 1.3347.
• The Mexican Peso selloff deepened, with USD/MXN rallying over 1.25% towards 17.50, and the Canadian Dollar weakened, driving USD/CAD to its highest since late July.
• The Australian Dollar tumbled 1.07% to around 0.7040 and the New Zealand Dollar fell 1.00% to around 0.5670.

Commodities in focus

• Silver was the day's biggest mover: it gave up the top of its three-week range near $68.00 and tumbled 3.67% to $64.59, after an intraday high of $67.52.
• Gold sank over 1.5% to trade near $4,285 as the stronger dollar and higher yields weighed. TD Securities published a call the same day for a new bullish phase toward $5,000 — a forecast, not a level the session traded.
• West Texas Intermediate (WTI) crude oil flatlined near $89.00 through the European session, 13% below last week's highs, after ING pointed to higher Saudi exports, a surprise US inventory build and progress in the US-Iran talks. It rebounded above $90 in the US session, snapping a five-day losing streak.

Europe joined in; the UK and Australia did not

• The eurozone flash composite PMI rose to 53.1, a 41-month high, with services at 53.0. France's Services PMI surprised at 51.4 against a 48.3 forecast, moving back into expansion, while Manufacturing missed at 50.3. Germany's Services PMI beat at 52.9, though Manufacturing came in lower than anticipated at 53.8.
• The UK was the weak spot: Services slipped to 51.7 from a 52.5 prior, against a 52.0 forecast, dragging the composite to 51.7, its weakest in three months; only headline Manufacturing beat, at 52.0. Australia's Manufacturing PMI decreased to 49.3, entering contraction territory.

Market gauges

• The FSI, our market sentiment gauge, registered 65 (Greed), with the MRS at 69 and CTS at 71.
• Our strength gauge ranks the eight majors against each other every minute and counts how long each spends at the top and at the bottom of that table. The Australian Dollar sat at the top for 25% of the session's minutes; the dollar sat at the bottom for 23% of them. That looks backwards next to a dollar index at a two-month high, and it is not: the table counts minutes spent in each place, not the session's net move, so a currency can spend more minutes at the bottom than any other and still finish the session higher.
• Last week's wrap set the test of whether the dollar could reach the top half of that table: it did on Tuesday, for the first time since the question was asked, and on Wednesday it fell back to seventh. That answers the wrap: the dollar can reach the top half, but it has not held it.

Ahead

• Traders turn to the Swiss National Bank's monetary policy assessment, Germany's ifo business climate, remarks from the Fed's John Williams, and the Xi-Trump summit InvestingLive reported for 24 September.