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The US ISM Manufacturing Purchasing Managers’ Index is set to remain above 55, reflecting moderate growth. The publication serves as a clue toward Friday’s Non-Farm Payrolls report. Meanwhile, currency markets have returned to the US dollar safety-trade ahead of US elections and amid surging covid cases, Joseph Trevisani, an Analyst at FXStreet, reports. 

Key quotes

“Business sentiment from the Institute for Supply Management (ISM) in its Purchasing Managers’ Index (PMI) is forecast to edge to 55.6 in October from 55.4 in September.”

“The New Orders Index, the gauge of incoming business which had reached a record 67.6 just two months ago in August and then registered a strong 60.2 in September, forecast to drop back into contraction at 45.9 in October.”

“Sentiment toward hiring as given in the Employment Index is predicted to retreat to 40.9 in October from 49.6. This index has not been above 50 since July 2019.”

“The expected declines in New Orders and Employment are a warning that the burst of activity in the third quarter that produced a record 33.1% expansion (annualized rate) may be heading for serious problems in the final three months of the year. The magnitude of the drop in business far greater than the normal cycle during an expansion.”

“Markets have reverted to their early pandemic phase of watching viral caseloads in Europe and the United States. While the recent gains in the US dollar have not been as violent or as far-reaching as those in March, they have become the dominant trading motif.”

“Between the pandemic focus and the US Presidential Election on Tuesday, the potentially distressing data from the Institute will get lost in the news flow and should not elicit a currency market reaction. It will not, however, be forgotten as the fourth quarter unrolls.”