ism manufacturing index

GBP/USD

On the last working day of December, the GBP/USD pair closed below the level of 1.2745. Therefore, in order to confirm its intention to continue the upward movement (if the pound intends to do so), it needs to reverse and close above 1.2745. This will take time. As a result, even if it closes today's session with a white candle, this won't be a signal for an upward move.

 

We expect the main movement to take place tomorrow with the release of the ISM Employment and Manufacturing Indexes for December.

The forecast for the ISM Manufacturing PMI is 47.1, compared to the previous 46.7. We believe that the data could bring optimism back to the markets and risk appetite.

Therefore, we still expect the pound to rise towards the upper band of the price channel near the target level of 1.2930. The Marlin oscillator is already in negative territory but has not yet firmly settled there.

 

 

On the 4-hour chart, the price is progressing above both indicator lines. The Marlin

Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

There Are Some Reasons Why The US GDP May Reach Ca. 3% | ISM Manufacturing Index Reached 52.8

ING Economics ING Economics 01.09.2022 20:22
Decent manufacturing activity, improved trade and inventory contributions and the cashflow boost from falling gasoline prices mean the US is set for a strong third-quarter GDP reading of around 3%, but another decline in residential construction reinforces the worries about what might happen later in the year The ISM manufacturing index held up better than expected in August, which should give a boost to strong third quarter GDP ISM holds up as rising orders and falling prices offer hope for the sector The ISM manufacturing index held up better than expected in August, coming in at 52.8, unchanged from July and better than the 51.9 consensus. Mixed regional indicators and a softer China PMI had raised warning flags, but instead new orders moved back into positive territory at 51.3 from 48 while employment rose to a five-month high of 54.2, boosting hopes of a decent manufacturing contribution to Friday's jobs number. Regarding jobs, the ISM reported that “companies continued to hire at strong rates in August, with few indications of layoffs, hiring freezes or head-count reductions through attrition. Panelists reported lower rates of quits, a positive trend”. US and Chinese manufacturing purchasing managers' indices Source: Macrobond, ING   There was also a rise in the backlog of orders which suggests that the dip in the production component to 50.4 from 53.5 is just a temporary blip and that manufacturing output can continue growing at a firm pace over coming months. Indeed, the ISM cite the better lead time for supplier deliveries and the falling prices paid component as factors that “should bring buyers back into the market, improving new order levels” The Fed will also take some comfort from the prices paid component declining to 52.5. This index was above 80 as recently as May and reflects the steep falls in energy and key commodity prices. Putting it together, with the better trade and inventory numbers and the massive support to consumer spending power and confidence from the falls in gasoline prices we look for 3% annualised GDP growth in the third quarter after the technical recession in the first half of the year. This should be supportive of our Fed funds call of 3.75-4% rates for year end. Construction highlights the weakening medium-term outlook There was less positive news in the construction data, which fell 0.4% month-on-month  in July after a 0.5% fall in June. Residential construction was the main reason with the slowdown in housing activity set to translate into falling home building over at least the next six months. Annualised US residential and non-residential construction spending ($bn) Source: Macrobond, ING   Declining housing transactions implies big declines in residential construction and weakness in some retail sales components such as building supplies, furniture and home furnishings. Falling house prices would compound the downside risk for confidence and spending so while 3Q activity overall looks pretty good, 4Q will be much more challenging, especially with China under pressure and Europe facing an energy catastrophe. Read this article on THINK TagsUS Orders Manufacturing Construction Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
August CPI Forecast: Modest Inflation Increase Expected Amidst Varied Price Trends

Market Focus Shifts to US Data Amid Quiet Start to the Week

ING Economics ING Economics 03.07.2023 09:32
FX Daily: Quiet start to an intense week The Independence Day holiday in the US means the week should start quietly in markets, but US data will soon attract the market's attention again now that a July Fed rate hike is a consensus view and there is also speculation about a move in September. We think the dollar can find some support this week. In the CEE region, central banks in Romania and Poland meet.   USD: Data in focus amid thin holiday volumes The month of June saw the dollar weaken against all G10 currencies except for the Japanese yen, but the greenback has been quite supported in the past few days. Some hawkish comments by Federal Reserve Chair Jay Powell at the Sintra central bank symposium last week have helped markets to close the gap with the FOMC’s dot plot projections: the Fed funds futures curve currently prices in 34bp of tightening to the peak, a 10bp increase compared to a week ago. Crucially, markets are now actively considering the option of two rate hikes. This week should start quite quietly with the Independence Day holiday meaning US markets should have reduced flows until tomorrow. Still, US data activity will peak as markets assess the probability of a September hike now that a July increase appears to be the consensus view. Today, all eyes will be on the ISM manufacturing index, although a greater focus will be on the services survey released on Thursday (the May print dropped more than expected). On Friday, jobs figures for the month of June will be published: after the latest comments by Powell, it will probably take a very weak reading to put a July hike under discussion. On the Fed side, the first event to note is on Wednesday, when the June FOMC minutes are released. The dollar can probably find some more support this week as markets see more reasons in the data and the minutes to gradually align with the more hawkish dot plot projections.
Turbulent Times Ahead: Poland's Central Bank Signals Easing Measures

US Stock Market Closes Early for Fourth of July, ISM Manufacturing Index Contracts Again; Tesla Shares Surge on Strong Q2 Deliveries

Ed Moya Ed Moya 04.07.2023 08:15
US stock market closes at 1 p.m. and the bond market closes at 2 p.m. EST  and will stay closed for the Fourth of July. US ISM Manufacturing index contracts for an eight straight month Tesla shares pop on robust Q2 delivery data The start of the second half of the year is not doing much for US stocks as most of Wall Street is in holiday mode for the Fourth of July.  Today’s shortened trading session saw traders focus on strong electric vehicle data from Tesla and a weak ISM Manufacturing report.      ISM The headline manufacturing reading fell to 46.1, the eight straight contraction and weakest reading since May 2020.  The ISM manufacturing report showed a large price drop with prices paid and the employment component fell into contraction territory.  Prices paid fell from 44.2 to 41.8, the lowest levels in a year.  The news was not all bad as new orders rose from 42.6 to 45.6.  The dollar tumbled following the ISM report that might suggest manufacturing activity is getting close to finding a bottom.  Fed swaps saw a lower peak rate following the softer manufacturing report.  Student Loan Debt The Supreme Court delivered a big blow to millions of students that were hoping to have up to $20,000 of loan debt wiped away.  The Biden administration was hoping to get a major win with the $1.8 trillion student loan crisis. They will now scramble to formulate a new plan that will give students a break before the federal student loan payments are due in October.  This could be a noticeable hit to the economy as these students haven’t had to make payments since the pandemic began.  Biden announced a one-year ramp on loan repayments, which is probably just the beginning of pledged efforts to help students.  This will likely become a campaign issue for Biden.    Tesla It shouldn’t come as a surprise that Tesla posted a record number of deliveries in the second quarter after all the price cuts, a resilient US consumer and a decent performance in China. Tesla delivered 466,140 vehicles in Q2, much better than Wall Street’s expectation of 448,350 cars.  When it comes to analysts ratings, Tesla mostly has buy and hold ratings, but that might improve following these results.  BYD also posted robust sales in China, topping Volkswagen for the first time.  Volkswagen was king in China for the past 15 years, so this overtaking is a key changing of the guard moment for BYD.  China has gone all-in with electric vehicles and that is benefitting Tesla and BYD.     
EUR Under Pressure as July PMIs Signal Economic Contraction

Quiet Day in FX as US Markets Take a Break on Independence Day

ING Economics ING Economics 04.07.2023 09:18
FX Daily: A hawkish ‘skip’ by the Reserve Bank of Australia The RBA decided to focus on decelerating inflation rather than the strong labour market and kept rates on hold overnight. Still, it reiterated a data-dependent approach and signalled openness to more tightening ahead. In general, it should be a quiet day in FX today due to the US national holiday, but things will get hectic again from tomorrow.   USD: National holiday today, but volatility to pick up from tomorrow The week has started without very clear direction dynamics in dollar crosses, largely due to reduced flows in US markets around the Independence Day holiday: US bond and equity markets are closed and there are no data releases, so expect another quiet day in FX. Yesterday, the ISM manufacturing index was released and came in at 46.0, below consensus expectations. The print was in contractionary territory (i.e. below 50) for the eighth consecutive month and hit its lowest level since May 2020. It’s worth noting that ISM manufacturing has been a historically accurate leading indicator of GDP dynamics and it currently points to a substantial slowdown.   This week, markets will once again need to filter their rate expectations for the evidence offered by data releases in the US. The reaction to the ISM manufacturing index has been limited due to reduced volatility around the US holiday, and also because the ISM services (out on Thursday) has been a bigger market mover. USD-crosses volatility will pick up again tomorrow when the focus will shift to FOMC minutes.
Likely the Last Hike for a While: FOMC Meeting Insights

Likely the Last Hike for a While: FOMC Meeting Insights

ING Economics ING Economics 24.07.2023 09:50
But it is likely the last hike for a while... By the time of the next FOMC meeting on 20 September, we will have had two further job and inflation reports, a detailed update on the state of bank lending plus more time for the lagged effects of the already enacted Fed tightening to be felt. In terms of inflation, the next couple of months have some tough comparisons with last year. Energy prices fell sharply last summer so headline year-on-year CPI could be a tenth or two of a percentage point higher than the current 3% rate at the September FOMC meeting, but core inflation looks set to slow further and could be down at around 4.2% versus the current 4.8% rate. If anything, the risks are that core inflation could be a little lower given decelerating housing rent inflation may materialise more quickly than we are currently conservatively forecasting. It is also the composition of inflation the Fed will be paying close attention to. Is the super core (non-energy services ex housing) slowing meaningfully? We think the answer will be 'yes' based on lead surveys such as the ISM prices paid, PPI trade services and the National Federation of Independent Business price intentions surveys.   Inflation pressures are fading   As for activity, industrial activity is already struggling with the ISM manufacturing index in contraction territory for the past nine months, while consumer spending growth is slowing. Over the next two months, we think the headwinds for activity will intensify with outstanding stock of commercial bank lending set to fall further thanks to the combination of higher borrowing costs and tightening of lending standards. This is a hugely important story given the insatiable appetite for credit within the US economy. We may also see the spreading awareness of the financial implications of the restart of student loan repayments starting to impact the spending behaviour of tens of millions of Americans. So, by the time of the 20 September FOMC meeting, we think the Fed will have evidence to be pretty confident that inflation is on the path to 2% and that activity is slowing to below trend rates and the jobs market is cooling. This is likely to be characterised as another pause and the Fed is likely to keep one additional rate hike in its forecast profile before year-end. However, our base case is that it will not carry through with it, and 5.25-5.5% marks the peak for US rates.   Market rates to edge towards 4% and money markets to slowly re-tighten post the FOMC The US rates curve has been re-pricing in recent weeks to reflect the relative robustness of the economy, primarily by pricing out many of the rate cuts that had been discounted. The liquid portion of the strip out to early 2025 is now not tending to dip below 3.75%. Adding a 30bp term premium to this suggests that the US 10yr yield could easily be closer to 4%. It’s far from a perfect model, but it does help to explain why the 10yr yield has not collapsed lower, and in fact, we rationalise this as a factor that can force US yields higher as a tactical view. It goes against the consensus out there that the inflation story is behind us but is rationalised by the reality of relative contemporaneous macro robustness. For this reason, we maintain a moderate bearish stance on the directional view, expecting market rates to remain under moderate rising pressure. A hawkish Fed pushes in the same direction, preventing the strip from becoming too inverted. The Fed may or may not choose to focus on liquidity circumstances at the press conference. If quizzed, it will likely note that the impact of ongoing quantitative tightening and resumed bills issuance by the US Treasury is largely showing up in reduced amounts going back to the Fed on the reverse repo facility. The Fed will generally be happy with this, as this facility is more of a balancing mechanism, one that can take in liquidity that is not flowing into bank reserves. Bank reserves themselves have not seen a material fall, which acts to keep the overall liquidity banks circumstance reasonably ample. It also coincides with money market funds balances still around record highs and bank deposits holding up very well, too. Many of these factors will, in fact, justify the Fed’s decision to maintain a tightening trajectory for policy, as at least the price of money continues to rise even if underlying liquidity volumes are slow to fall.
US Weekly Jobless Claims Hit Lowest Level Since February; Apple Shares Slide Amid China's iPhone Crackdown; USD/JPY Shows Volatility Amid Interest Rate Fears and Tech Stock Woes

Rates Spark: When the Hawks Seem Dovish

ING Economics ING Economics 01.09.2023 10:19
Rates Spark: When the hawks seem dovish Rates remained under downward pressure, only this time it wasn't the US. The Bund curve bull-steepened as eurozone inflation was less hot than feared and the European Central Bank's Schnabel was seen as dovish. We are less certain that the odds of another hike in September can be dismissed as easily. But for today the focus is on US jobs.     Rates remain under downward pressure US rates were still under moderate downward pressure, but for a change relatively quiet with the data yesterday largely falling in line with expectations. But markets were probably also gearing up for today’s payrolls release, one data point that has had the ability to shift market sentiment in the past.   More bullish action was seen in Sterling rates and Bund yesterday. In the case of Sterling rates a reassessment of especially front-end rates was caused by the Bank of England Chief Economist Pill being unusually explicit about his preference for a “Table Mountain” profile – he was speaking in Cape Town –  for policy rates, rather than a “Matterhorn”. EUR rates were also under downward pressure. Some of that was a relief that the aggregate eurozone inflation data did not come in as hot as feared after prior country releases had suggested upside risks. In then end the headline rate proved stable, but more importantly the core rate came down to 5.3% year-on-year. Mind you, that is still way above comfortable levels for the ECB.   When a hawk sounds dovish a closer look is warranted Therefore, it was all the more surprising that ECB’s arch hawk Isabel Schnabel struck a more balanced tone than many would have expected of her. She continued to highlight the uncertainties surrounding the inflation outlook, but at the same time acknowledged that growth prospects had also deteriorated in the meantime. With regards to upcoming policy decisions she would not commit to any outcome, and rather stressed the data dependent approach. In more geographic terms: it’s elevated terrain but one can only look about 100m – it could be South Africa or the Alps. The market went for the dovish interpretation, though we think that some of Schnabel’s assessments still point to her hawkish nature. For instance, she pointed out that under certain circumstances a hike could also “insure against the continued elevated risk of inflation remaining above [the ECB’s] target for too long”. Yes, she refrained from making any prediction on rates. But she highlighted that the ECB not being able to pre-commit to any future action also means policymakers “cannot trade off a need for a further tightening today […] against a promise to hold rates at a certain level for longer”. This would close off one possible avenue for bargaining between the doves and hawks as the next steps are debated. Finally, she also stressed the importance of real interest rates as a measure of the ECB’s effective policy stance. More specifically she cautioned that the recent decline in real interest rates “could counteract our efforts to bring inflation back to target in a timely manner”. In the end Schnabel is but one voice, although an important one. The ECB minutes of the July meeting eventually also conveyed a slightly changed tone within the Governing Council – still very much concerned about inflation, but with doubts about one's own still very optimistic growth outlook starting to creep in. The market's pricing for the September meeting has slipped from previously discounting a greater than 50% probability for a hike to now around 25%.    The effective policy stance is not as restrictive as desired   Today's events and market view The US payrolls report takes the spotlight today, but those forecasting the numbers do not have much to go on given that the ISMs are only published after the jobs data this time around and that the ADP has proven of limited value as a predictor. The consensus is looking for more signs of a cooling labour market, expecting a 170k payrolls increase – with individual forecasts ranging from 120k-230k – and wage growth decelerating somewhat to 4.3%. At the same time the unemployment rate is expected to stay at 3.5%. After the jobs data we will then see the ISM manufacturing index which is seen improving only marginally to 47, meaning that the index will continue languishing in the contraction area. 
Upcoming Economic Data: Focus on US Manufacturing Index, Eurozone CPI, and GDP Reports in Hungary and Poland

Upcoming Economic Data: Focus on US Manufacturing Index, Eurozone CPI, and GDP Reports in Hungary and Poland

ING Economics ING Economics 27.11.2023 14:30
Next week in the US, we will be closely following the ISM manufacturing index and the Fed's favoured measure of inflation. All eyes will be on CPI releases in the eurozone, where we expect continued improvement and the core rate falling to 4%. Elsewhere, we expect to see positive third-quarter GDP releases in Hungary and Poland.   US: Closely following the ISM manufacturing index for any signs of a rebound Markets have firmly bought into the view that the Federal Reserve won’t hike interest rates any further and that 2024 will see a series of interest rate cuts from the second quarter onwards. Around 90bp of cuts are currently priced, whereas we're forecasting 150bp for next year on the basis that consumer weakness is likely to be a key theme given subdued real household disposable income growth, fewer savings resources, and less borrowing as interest rates continue rising. This should allow inflation to slow more quickly, giving the Federal Reserve greater scope to loosen monetary policy. Next week’s data flow includes the Fed’s favoured measure of inflation, which we expect to show a 0.2% month-on-month rate of price increases. This is broadly in line with what the central bank wants to see and, if repeated over time, would bring the annual rate of inflation as measured by the core personal consumer expenditure deflator back to 2%. We also get more housing numbers, which should signal healthy new home sales, but this is due to the lack of availability of existing homes for sale. Prices should continue rising in this environment, but with home builder sentiment having plunged in recent months, cracks are starting to form as the legacy of high borrowing costs bites more and more harshly. We will also be closely following the ISM manufacturing index for any signs of a rebound after having been in contraction territory for the past 12 months. Eurozone: Core inflation to continue improving to 4% Next week, we'll see new inflation numbers for the eurozone. Inflation dropped more than expected in September and October, and the question now is whether the low inflation trend will continue. We expect some continued improvement, with core inflation falling to 4% and headline inflation dropping to 2.7%. Still, there are signs of continued inflation pressures that shouldn’t be ignored after a few encouraging data releases. The November PMI showed that businesses still see increased input costs, resulting in more survey respondents indicating that selling price inflation ticked up. Thursday will tell us whether inflation has continued its rapid normalisation. Poland: We forecast a further decline in core inflation Flash CPI (Nov): 6.7% YoY Our forecasts suggest that in November, CPI inflation inched up to 6.7% year-on-year from 6.6% YoY in October, marking the first increase since it peaked in February. We expect a further decline in core inflation, but it will be accompanied by less favourable developments in energy prices as gasoline prices bounced back after two months of declines. GDP (3Q23): 0.4% YoY We expect the flash estimate of 0.4% YoY to be confirmed by the final data. We will also learn the composition of third-quarter GDP. According to our forecasts, household consumption declined slightly (-0.2% YoY), while fixed investments continued expanding at a solid rate (7.5% YoY). At the same time, we project a smaller drag from a change in inventories and a lower contribution of net exports than observed in recent months. Monthly data suggests that economic recovery continued at the beginning of the fourth quarter as annual change in industrial output and retail sales turned positive in October. Hungary: Novembers manufacturing PMI expected to remain in positive territory The Statistical Office will release the details behind Hungary's strong GDP growth in the third quarter next week. We see positive contributions from industry, construction and agriculture. On the expenditure side, we think net exports were the main driver of the improvement, along with some early positive signs on consumption. November's manufacturing PMI could remain in positive territory, with export capacity still in good shape, reinforcing our view that year-on-year GDP growth could also return to positive territory in the fourth quarter. Key events in developed markets next week Key events in EMEA next week    

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