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Strongest ISM Manufacturing Since June 2011 Sets Up Dollar for More Gains

Strongest ISM Manufacturing Since June 2011 Sets Up Dollar for More Gains

2013-09-03 14:55:00
Christopher Vecchio, CFA, Senior Strategist
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Talking Points:

- US ISM Manufacturing expands at its fastest pace since June 2011.

- Contracting inventories coupled with expanding new orders, production suggest that US manufacturing strength will persist.

- USDJPY BULLISH

Manufacturing activity in the United States is seeing a rebound unseen in several years, according to data compiled by the Institute for Supply Management released today. The ISM Manufacturing gauge for August rose to 55.7, the highest level since June 2011 when the index was 55.8.

Indeed, manufacturing in the United States looks well-positioned to outperform going forward given the subcomponents of the report; and the report should help keep the underlying fundamentals under the US Dollar pointed higher.

Of note, the Employment subcomponent remained in expansion territory at 53.3, though was a touch softer than the July reading of 54.4. The optimism from the report is seen in the New Orders and Inventories subcomponents. With New Orders surging to 63.2 and Inventories staying in contraction territory at 47.5, it is clear demand is building, suggesting building strength in the underlying pace of growth for the US economy.

Here are the headline figures lifting the buck:

- ISM Manufacturing (AUG): 55.7 versus 54.0 expected, from 55.4.

- ISM Prices Paid (AUG): 54.0 versus 51.2 expected, from 49.0.

- Construction Spending (JUL): +0.6% versus +0.4% expected, from 0.0% (revised higher from -0.6%) (m/m)

Read more: Aussie, Pound Lead; US Dollar Holds Gains Despite Misleading Syrian Report

USDJPY 1-minute Chart: September 3, 2013

Strongest_ISM_Manufacturing_Since_June_2011_Sets_Up_Dollar_for_More_Gains_body_x0000_i1027.png, Strongest ISM Manufacturing Since June 2011 Sets Up Dollar for More Gains

Charts Created using Marketscopeprepared by Christopher Vecchio

Following the releases, the USDJPY jumped from ¥99.45 to as high as 99.83, but was trading back to 99.77 at the time this report was written. Elsewhere, the US Dollar hit fresh session highs against the Euro and the Swiss Franc, with the EURUSD sliding to $1.3144 and the USDCHF rallying to Sf0.9383.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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