Talking Points:
- US ISM Manufacturing rises to 51.5 from 49.4 versus 50.4 expected.
- EUR/USD slides after U.S. factory output claws back into positive terrain.
- See the DailyFX economic calendar for the week of October 2 to October 7.
Factory output clawed back into expansionary territory in September after contracting for the first time in six months in August the Institute of Supply Management reported earlier suggesting the previous pull-back may have been temporary in nature and caused by the flooding in Louisiana and wildfires in the West.
The agency said that its September Manufacturing Purchasing Manager’s Index (PMI) rose to 51.5 from 49.4, significantly above market expectations of 50.4. As a reminder, a print below 50 in the ISM Index indicates contraction in the manufacturing economy.
The report breakdown showed that ISM Prices Paid remained unchanged at 53.0 while ISM New Orders surged to 55.1 from 49.1. Meanwhile, Employment rose to 49.7 from 48.3 but continued in negative terrain signaling demand for manufactured products remain soft for which employers in the sector do not feel the need to accelerate hiring.
The September Jobs report, however, continues to be the focal point of the week. The Bureau of Labor Statistics will release Non-Farm Payroll numbers on Friday. As of today, the market expects to see +173K in new jobs following a +151K print in August. Strong jobs gains will provide evidence that the U.S. Labor Market continues to improve and could embolden the Fed to ramp up its hawkish narrative paving the way for a 25bps interest rate hike in December.
Here’s a summary of the US data print:
- USD ISM Manufacturing (SEP): 51.5 versus 50.4 expected, from 49.4.
- USD ISM Prices Paid (SEP): 53 versus 53.5 expected, from 53.
- USD ISM New Orders (SEP): 55.1 from 49.1.
- Construction Spending (AUG): -0.7% verus +0.3% expected, from a revised -0.3%
See the DailyFX Econmic Calendar for the rest of this week.
Chart 1: EUR/USD 1-minute Chart Intraday (October 3, 2016)
Following the release of the ISM Report, EUR/USD channeled lower falling as low as 1.12051 as the data suggests the manufacting sector in the U.S. is improving and could strenghten the case for a rate hike later this year. At the time this report was written, however, EUR/USD has settled around 1.12093
Read more: Pound Drops as Brexit Timeline Emerges, US Dollar Eyes ISM Data
--- Written by Christopher Vecchio, Currency Strategist and Diego Colman, DailyFX Research
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
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