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US ISM Manufacturing PMI has slowed down in July. ISM Manufacturing PMI scored 50.9 points in July, weaker than 55 points estimated. USD/JPY is falling towards the historic low and so is USD/CHF. EUR/USD has its own issues, and the reaction is different – the euro is falling against the dollar. Risk aversion dominates. QE3 is seriously on the agenda.

Dollar/yen is now at 76.55, only 30 pips above the swing historic low reached after the pair collapsed in March. USD/CHF is under 0.78. It already fell lower before the release, and is now accelerating.

EUR/USD is suffering from this figure: a slowdown in the whole world means weakness in Europe as well. In addition, the European debt crisis is far from over. The situation in Italy and Spain is very worrying.

GDP hardly rose in the first half of 2011: a disappointing rise of 1.3% in Q2 (1.8% was expected) and a deep downwards revision to 0.4% in Q1. A revision of data already revised twice wasn’t expected, and needless to say, with such an insignificant growth rate, the situation is very worrying.

The blame for the weak growth in H1 can be partially put on the  devastating March 11 catastrophe in Japan, but this is already quite far away.

This fresh purchasing managers’ index for the first month of Q3, shows that the US economy is still stuck in the mud. Deep in the mud.

Ben Bernanke is now expected to put a third round of quantitative easing on the agenda. As the US economy comes to a halt, the needed justification for more stimulus is now found.

This is the first of many economic indicators leading up to the Non-Farm Payrolls release on Friday. The complementary indicator Non-Manufacturing PMI, is released on Wednesday. The services sector is much bigger, and much more important.

See more about the major events in the forex weekly outlook.

For more on EUR/USD, see the euro to dollar forecast.


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