Daily FX Trading Update: Greenback Dumped on Weak ISM PMI

The US dollar gave up a lot of ground in the previous US session when the ISM manufacturing PMI printed dismal results. The reading slipped from 52.6 to 49.4 to indicate industry contraction, lower than the estimated fall to 52.0. The jobs component showed a sharper contraction, signaling that the NFP might fall short of estimates. Analysts are expecting to see a 180K gain in hiring, lower than the previous 255K increase, but an upbeat figure could keep rate hike expectations in play.
The euro took advantage of dollar weakness but gave up ground to the pound. Final manufacturing PMI readings were mostly in line with expectations and no major revisions were made. Only the euro zone PPI is due today and a 0.1% uptick in producer prices is eyed, lower than the earlier 0.7% gain.
The pound staged a strong rally when the UK manufacturing PMI beat expectations, reminding traders that the economy is doing well despite the Brexit vote. The reading jumped from 48.3 to 53.3 to indicate a return to industry growth, outpacing the projected rise to 49.1. There are no reports due from the UK economy today.
The franc was able to get a boost from stronger than expected Swiss retail sales. The report showed a 2.2% year-over-year decline, smaller than the projected 3.1% slump and the previous 3.5% drop. There are no reports due from the Swiss economy today.
The yen continued to fall across the board as BOJ easing expectations continued to weigh on the Japanese currency. Japan’s consumer confidence index is due next and an improvement from 41.3 to 41.6 is expected, although a weak read could revive expectations of slower spending down the line.
Commodity Currencies (AUD, NZD, CAD)
The comdolls were able to take advantage of the dollar selloff, as the weak leading employment indicators could weigh on Fed rate hike odds. Also, China’s official manufacturing PMI beat expectations and showed a return to industry growth. Canada’s trade balance and labor productivity data are due today, with the former expected to show a smaller deficit of 3.2 billion CAD from the earlier 3.6 billion CAD shortfall.
To contact the reporter of the story: Samuel Rae at samuel@forexminute.com
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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.