US Dollar Upside Momentum Weakens as ISM Manufacturing Improves

ISM Manufacturing, US Dollar, COVID, Jobs – Talking Points

• US Dollar price takes hit on improved ISM manufacturing data
• US Manufacturing activity continues to improve in July at 54.2
• Employment index improves, but historical weakness persists

Recent US Dollar momentum continued this morning as the ISM manufacturing report for July crossed the wires at 54.2, beating expectations of 53.6. While the greenback sank through most of July, price action is now bouncing back for the start of August. However, the USD gave up some gains following the release of the report, with the DXY index dropping to session lows.

US Dollar Basket (1-Min Chart)

Source: IG Charts

{{USD|TOST}}

Giving a closer look into the report reveals new orders increasing from the previous month, with the index now at 61.5% from the prior 56.4% read. Employment also improved for July; however, the index is still in contraction territory at 44.3%. One respondent in the report noted, “Incoming orders are slow. This is usually our busiest time of the year, but production is reduced due to lack of demand. Additional layoffs expected.”

ISM Manufacturing Index

Data Source: Bloomberg

After trader’s digest today’s data from the ISM manufacturing report, eyes will turn towards this week’s Non-Farm Payrolls report, where 1.65 million jobs are expected to be added. However, even with those jobs, the unemployment rate is expected to continue in the double digits at 10.5%, a troubling number regardless.