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The ISM Manufacturing PMI for January 2014 disappointed big time by falling to a low of 51,3 points, much worse than forecasts. It was expected to show a small slide from 57 to 56.2 points, well within growth territory. The headline figure as well as the employment component serve as a hint towards the Non-Farm Payrolls on Friday. Also the employment component is down: 52.3 points, down from 55.8 points. This still reflects growth (above 50), but this is weak growth.Can the taper train continue?

Before the publication, EUR/USD was trading steadily around 1.35, USD/JPY reached to new lows around 101.80 and GBP/USD was certainly on the back foot, trading around 1.6350. The US dollar is down, without any exception. EUR/USD is now above 1.35, GBP/USD is recovering above 1.6350 amd USD/JPY is taking it badly by falling below 101.50.

New orders are very sharply down: 51.2 points after a boiling hot 64.4 points in December. Prices are up. The bad result could be blamed on the bad weather during January, but this doesn’t seem likely.  

More currency reactions: the Canadian dollar extends its recovery and USD/CAD falls below 1.1050. AUD/USD is above 0.88 at 0.8815. NZD/USD is climbing above 0.81. For EUR/USD, the key level is 1.3515, and it needs to break back above the broken uptrend to provide a real bullish signal.

US construction spending was expected to rise by 0.3%for the month of December 2013 after a big jump of 1% in November. This also disappointed by rising only 0.1%. In addition, US vehicle sales came out below expectations. This is not the best day for the greenback.

Earlier, Markit released its final manufacturing PMI read for January at 54 points, a minor revision to 53.9 points initially reported. The ISM report carries more weight.  The ISM Non-Manufacturing PMI is scheduled for Wednesday. The services sector (non-mfg) is much bigger than the manufacturing one.

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