Investing.com -- The U.S. Dollar Index surged to fresh four-month highs on Friday, amid mounting concerns of a recession in the U.K. and improved manufacturing conditions at home, ahead of next week's two-day Federal Reserve meeting.
The index catapulted to a session-high of 97.59 on Friday, before closing the U.S. afternoon session at 97.41, up 0.47 or 0.48% on the day. With the sharp gains, the index reached its highest level since March 10 – the last time it cleared the 98 threshold. Over the four weeks that have passed since last month's historic Brexit referendum, the index has jumped more than 4%, erasing all of the losses from a downbeat spring. The Dollar is virtually flat since mid-December when the Federal Reserve ended a seven-year zero interest rate policy by approving its first rate hike in nearly a decade.
The greenback rose considerably against the British Pound in overnight trading after Markit reported that the British economy shrank at its quickest pace since early-2009, as economists digested the release of the first batch of Post-Brexit data since last month's surprising decision. Markit's U.K. Flash Composite PMI index for July fell 4.5 points to 47.7, exacerbating fears of an imminent recession throughout Britain.
As a result, GBP/USD slid more than 1% to an intraday low of 1.3079, falling back to near 1-week lows. Since voters in the U.K. spooked markets with their decision to leave the European Union on June 24, the Pound Sterling has tumbled nearly 12% against the Dollar.
Currency traders also closely parsed U.S. manufacturing data on Friday after the flash reading for July's PMI Manufacturing Index bounded up by more than a full point to 52.9, soaring to its highest level in nine months. The unexpected rise was driven by a flood of new orders, as new business volume expanded at the fastest pace since October, 2015.
EUR/USD fell more than 0.50% to an intraday low of 1.0956, holding onto most of the losses on Friday afternoon as reports surfaced of a mass shooting at a shopping mall in Munich. As of early Friday evening, the shooting left at least eight dead, while police conducted a manhunt for the suspect. The euro settled at 1.0976, down 0.45% on the session.
Investors await next week's Federal Open Market Committee (FOMC) July meeting for further indications on the timing of the U.S. central bank's next rate hike. On Friday, Fed Future Rates from the CME Group's (NASDAQ:CME) Fed Watch tool placed the odds of a single rate hike in 2016 at just under 50%.
Yields on the U.S. 10-Year rose one basis point to 1.57%, while yields on the Germany 10-Year fell one basis point to Minus-0.03%. Yields on both 10-year government bonds are down by more than 75 basis points over the last year.