Currency Traders Show Clear Hesitation Ahead of Critical Week of Event Risk

A morning Institute of Supply Management Manufacturing survey result was the only notable economic data release through the New York morning, with a marginally above-forecast result doing little to shift sentiment on the state of domestic industry. Manufacturing sector growth remained relatively flat through the month of November, with the headline ISM index remaining above the crucial contraction/expansion 50.0 mark at 50.8. Highlights on the data included a significant jump in Manufacturing Prices Paid—reaching their highest levels since June on a jump in raw materials costs. Net production bounced into positive territory after a brief drop below the 50 mark in October. Yet the mild improvement in output was not enough to bolster employment, with the Employment index reaching its lowest levels since March. Clearly, such results bode poorly for outlook on Friday’s key Non Farm Payrolls data, but markets await Wednesday’s ADP Employment Change and ISM Services numbers to clarify expectations for the payrolls report.

Other notable economic developments came from a US Treasury Secretary Henry Paulson speech to a forum on US housing—outlining the Treasury’s response to the threat of further housing market crisis. The government official revealed official plans to cooperate with mortgage lenders and creditors to forestall a fresh wave of house foreclosures in the domestic real estate sector. Yet the scarcity of specific details on the Treasury’s plans made it difficult to assess the true economic impact and cost of such official consumer bail-outs. Subsequent market indecision left domestic equities relatively unchanged, but a subsequent drop may make for the first daily decline in five trading sessions.  

The Dow Jones Industrial Average has thus far failed to build on previous upward momentum, shedding 25 points to 13,324 through time of reporting. Though the losses were relatively shallow, a 0.5 percent decline in the highly diversified S&P 500 suggested that the pullback was widespread. The tech-heavy NASDAQ Composite shed a similar 0.6 percent just an hour ahead of the New York Stock Exchange close.

Written by David Rodríguez, Currency Analyst for DailyFX.com