THE TAKEAWAY: USD ISM Manufacturing > 49.5 versus 51.4 expected, from 51.7 > USD/JPY BEARISH
The global PMI release period was off to a good start, with outperformance in Asia and mostly floundering in Europe (but that was expected). However, the US failed to hold its own, with its equivalent to the PMI, the ISM Manufacturing index, falling back into contraction, to its lowest official reading of the year. Just when US economic data was turning higher, it now appears to be backpedaling amid increasingly tense fiscal cliff/slope negotiations.
According to a Bloomberg News survey, economists forecasted the reading to come in at 51.4, but instead it disappointed at 49.5, a bigger decline than anticipated and much lower than the 51.7 reading in October. The details of the report aren’t exactly encouraging, either: the Employment sub-index dropped to 48.4 from 52.1; New Export Orders fell to 47.0 from 4800, reflecting further weakness in Europe; and New Orders fell to 50.3 from 54.2.
Accordingly, there’s something to be said about the likely impact that Hurricane Sandy had on these results; the storm hit the last week of October, derailing much of the Northeastern United States for the beginning of November. Nevertheless, some of the underlying components are showing distressing signs, which will be taken into consideration when the Federal Reserve meets on December 12. The probability of another QE package is high (likely outright Treasury purchases) given the conclusion of Operation Twist, so any further deterioration in significant US data will only lend to the notion that more easing is on the way.
USD/JPY 1-minute Chart: December 3, 2012
Charts Created using Marketscope – Prepared by Christopher Vecchio
Following the releases, the USD/JPY fell back from 82.32 to 82.19, before rebounding back to 82.29. The USD/JPY remains lower on the day, although it had retraced over half of its daily losses, at the time this report was written.
--- Written by Christopher Vecchio, Currency Analyst
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