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Strong US ISM Manufacturing PMI

Market Analysis

EURUSD, H4              

US ISM manufacturing index bounced 2.1 points to 51.5 in September, a little firmer than expected, and largely erased the 2.6 point decline to 49.4 in August, which was the lowest reading since February’s 49.5. The index had posted sub-50 readings, reflecting a contraction in growth, in six of the last twelve months. The components were mixed. The employment index remained weak, though it edged up a bit to 49.7 from 48.3. New orders climbed to 55.1 from 49.1. New export orders dipped to 52.0 from 52.5. Prices paid were steady at 53.0.

The rise to 51.5 from a 7-month low of 49.4 in August still left the ISM below the 52.6 July reading and the 16-month high of 53.2 in June, though the index is above December’s 48.0 expansion-low. The ISM sits well below the 59.9 cycle-high in February of 2011, as all the sentiment measures have remained depressed since the oil price plunge starting in Q3 of 2014. Today’s ISM pop follows a Chicago PMI rise to 54.2 from 51.4, a Richmond Fed rise to -2.0 from a 3-year low of -11.0, a Dallas Fed rise to -3.7 from -6.2, a Philly Fed bounce to 12.8 from 2.0, and an Empire State rise to -1.99 from -4.21. The mix should allow the ISM-adjusted average of the major surveys to fall to the 49 expansion-low seen in January and February and previously in October of 2012, from the 50 average in August, and previously in May and June. We saw a 12-month high of 52 in July that was also seen in March.

The USD rallied to intra-day highs against the yen and euro following the stronger manufacturing ISM, which lifted back to expansionary territory. EURUSD fell to 1.1207 from near 1.1225, as USDJPY was lifted to 101.55 from 101.35.


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Stuart Cowell

Market Analyst


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