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2 June 2022,03:40

Weekly Outlook

Positive Manufacturing PMI Buoys Dollar

2 June 2022, 03:40

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On Wednesday evening (GMT+3), the US ISM Manufacturing Purchasing Managers‘ Index (PMI) figure for May was released. May showed a reading of 56.1, higher than the forecasted 54.5 and the previous month’s value of 55.4. The ISM Manufacturing PMI measures product demand from over 300 key manufacturers in the US and is considered a major indicator of the US economy. A PMI above 50 indicates that manufacturing expanded from the previous month, while a reading below 50 suggests contraction. 

Despite outsized inflation figures, supply chain disruptions, and the effects of a global pandemic, the US economy has shown surprising resilience. The last time the Manufacturing PMI dropped below 50 was in June 2020.

A report from Wells Fargo writes that the PMI “offers a mixed read on the state of US industry”, showing growth in orders and order backlogs, incremental improvements in supplier deliveries, and a minor easing of inflation pressure. 

Post Market

The US dollar strengthened on the back of a combination of strong economic data for the US, hawkish Fed comments, and weaker economic data for many of its G7 peers. The DXY rose 0.73% on Wednesday evening and is trading steady near the 102 mark. Meanwhile, the 10-year Treasury yield reached an intraday high of 2.95%.

Despite higher Treasury yields, the non-yielding gold rebounded on Wednesday and has been trading steadily since. Spot gold is currently trading at 1844.35.

With strong economic data raising expectations of even more aggressive monetary tightening, combined with a warning of an “economic hurricane” from JPMorgan Chase President Jamie Dimon, the markets were risk-off. The S&P 500 was down 0.7%, the Dow Jones was down 0.5% and the Nasdaq was down 0.7%.

Investors are now advised to pay close attention to the upcoming US Nonfarm Payrolls, which will be released on Friday, 3 June at 15:30 (GMT+3).

As a friendly reminder, do keep an eye on market changes, control your positions, and manage your risk well. 

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