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US Dollar Gains After September ISM Manufacturing Report Shows Growth

US Dollar Gains After September ISM Manufacturing Report Shows Growth

Christopher Vecchio, CFA, Senior Strategist

THE TAKEAWAY: USD ISM Manufacturing (SEP) > 51.5 versus 49.7 expected, from 49.6 > USDJPY BULLISH

More confusing data out of the United States today with the September ISM Manufacturing index posting moderate gains to 51.5, above the 49.7 expected and above the August reading of 49.6. This is the first reading above 50.0 – and thus the first expansion in manufacturing – since May, when the index read 53.5. Why is this data confusing? Last week, Durable Goods data for August showed a -13.2% plunge on a monthly-basis, while the Chicago Purchasing Managers index printed 49.7 for September. For all intents and purposes, the data last week – which came in line with previous ISM Manufacturing releases – looks like a more reasonable assessment of the US economy.

Within the September ISM Manufacturing report were some interesting developments in various subcomponents. Prices Paid, a gauge of inflation, soared to 58.0 from 54.0, the highest such reading since April 2012 (61.0). The Employment subcomponent, which measures sentiment towards hiring within manufacturing, gained to 54.7 from 51.6, the highest reading since June 2012 (56.6). With respect to the Employment subcomponent, it is important to note that it remains below the six-month average of 54.9.

USDJPY 1-minute Chart: October 1, 2012

US_Dollar_Gains_After_September_ISM_Manufacturing_Report_Shows_Growth_body_Picture_1.png, US Dollar Gains After September ISM Manufacturing Report Shows Growth

Charts Created using Marketscope – Prepared by Christopher Vecchio

Following the better than expected data, the US Dollar initially sold off against the Euro and the commodity currencies, but by the time this report was written, the AUDUSD and EURUSD had traded back to their prerelease levels. But the one pair that stayed elevated was the USDJPY: the safe haven cross jumped from 77.90 ahead of the data to as high as 78.10, before falling back to 78.07.

--- Written by Christopher Vecchio, Currency Analyst

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