US Manufacturing Remains Sluggish

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The first significant indicator towards Friday’s Non-Farm Payrolls is in: ISM Manufacturing PMI stood in August on 49.6 points. A drop from last month’s 49.8 points to 50 was expected. 50 separates growth and contraction.

EUR/USD traded at 1.2577, under the 1.2587 line prior to the release and is now on the rise. USD/JPY was stable at around 78.40 and is falling now – dollar falling on QE3 anticipation.

While this drop isn’t dramatic, it is still the lowest in over 3 years. The employment component slid from 52 to 51.6 points. Employment is still growing, but at a slower pace. The important new orders component dropped deeper in contraction zone.

This important purchasing managers’ index scored less than 50 points in the past two months. The manufacturing sector was clearly the weaker link in the US economy, as also seen by the Fed’s regional manufacturing indicators such as the Philly Fed Index.

Earlier, Markit’s Manufacturing PMI for August was revised to the downside: from 51.9 to 51.5 points. This is a relatively new indicator and has less impact.

This week’s figures are critical for the Fed decision on September 13th, which could decide on QE3, although there are certainly other options, such as extending the low rate guidance.

Also in the US, construction spending also disappointed by dropping 0.9%, contrary to an expected rise of 0.4%.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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