US ISM Non-Manufacturing PMI stands at 52.1 points in June. This still points to growth, just more moderate. The employment component is actually better: 52.3 points. Last month it stood on 50.8. This reflects faster growth. It was expected to tick gently lower from 53.7 to 53.1 points, indicating the same level of moderate growth. This is critical for the Non-Farm Payrolls.
The headline figure is the lowest since January 2010, but the employment component provides hope for the NFP. EUR/USD resumes falling after the release. USD/JPY is sliding below 80.
Apart from the all-important employment component, new orders fell from 55.5 to 53.3. In the manufacturing report, it plunged much faster. New export orders fell from 53 to 49 – into contraction zone, probably reflecting the global downturn. The backlog of orders also fell significantly, from 53 to 47 points, into contraction, according to the report.
So far, job related indicators pointed to the upside:
- Earlier in the week, the ISM Manufacturing PMI surprised to the downside, falling below the critical 50 point mark that separates between contraction and growth. However, it’s important to note that the employment component remained stable at high levels, above 56 – reflecting strong growth.
- The ADP report for the private sector surprised to the upside with a report of a gain of 176K jobs. +103K was expected.
- Weekly jobless claims fell to 374K. +385K was expected.
The big event of the day was the rate cut by the ECB: they lowered the benchmark rate to 0.75% as expected, but surprised by eliminating the deposit rate: 0% instead of 0.25%.
The move by the ECB triggered a collapse of the euro. It was followed by the expected expansion of British QE by 50 billion pounds and the surprising rate cut by China.
All the monetary easing moves show that the global economy is down. This is dollar supportive.