Dallas Fed Manufacturing Index Falls To Its Lowest Level Since June 2023

Key Insights

• Dallas Fed Manufacturing Index decreased from -10.4 in December to -27.4 in January. 
• Production Index decreased from 1.2 to -15.4.
• New Orders Index declined from -10.1 to -12.5.

On January 29, the Federal Reserve Bank of Dallas released Dallas Fed Manufacturing Index report for January.

The report indicated that Dallas Fed Manufacturing Index declined from -10.4 (revised from -9.3) to -27.4, compared to analyst consensus of -23.

Production Index declined from 1.2 in December to -15.4 in January, while New Orders Index decreased from -10.1 to -12.5.

Dallas Fed Manufacturing Index has been in the negative territory since 2022. Currently, the index is not far away from the lows at -30.1 which were reached in May 2023.

Fed will release its Interest Rate Decision on Wednesday, and markets believe that the federal funds rate will remain unchanged. FedWatch Tool indicates that thee is a 47.7% probability that Fed will cut the federal funds rate by 25 bps at the meeting in March.

U.S. Dollar Index settled near the 103.80 level after the release of the Dallas Fed Manufacturing Index report. Treasury yields are falling today, but forex traders believe that Fed may not be ready to start cutting rates in March due to the strength of the U.S. economy. Most likely, the weaker-than-expected Dallas Fed Manufacturing Index report would not change this view.

Gold remains stuck near the $2025 level despite stronger dollar. Gold has been consolidating in the $2015 – $2035 range in recent trading sessions as traders waited for Fed decision.

SP500 settled near the 4890 level. At this point, the problems of the manufacturing sector have no significant impact on SP500 as traders are focused on AI-related stocks.

For a look at all of today’s economic events, check out our economic calendar.