A bullish U.S. Dollar was beaten down yesterday following the release of unexpectedly poor ISM Manufacturing PMI data. The index came in at 49.4, much lower than both the anticipated 52.0 and last month’s reading of 52.6. In fact, it was the worst result since November 2015, and there had not been a negative result such as this (i.e. below 50) for more than six months.
Worryingly for the U.S. economy, or at least for the manufacturing sector, there have only been two months of worse results since the economic crisis of 2008 / 2009. The details of the report show that new orders, production, employment and inventories are all contracting with increasing momentum.
Within a few minutes of the news release, the U.S. Dollar was down 0.70% against the Japanese Yen, 0.42% against the British Pound, and 0.53% against the Euro.
Market sentiment had been bullish on the greenback following better than expected data over previous days, and predictable Unemployment Claims numbers earlier had failed to shake that. However, it is Friday’s slew of data, including the Non-Farm Payrolls number, which is likely to be far more decisive for the dollar. A significantly worse than expected number would now seem likely to produce a meaningful reversal to the greenback’s recent advance.
About the ISM Manufacturing PMI
The report, also known as the Manufacturing ISM Report on Business, is released early every calendar month after compilation by the Institute for Supply Management. It is a survey taken of approximately four hundred purchasing managers in key business areas within the manufacturing sector regarding ratings of general business conditions.