US manufacturing data flat, dents rate rise optimism

Tuesday, November 03, 2015

US manufacturing data released yesterday offered little in the way of encouragement to investors as the consensus outlook among manufacturers was one of sluggish overseas demand and a lack of domestic restocking. The final Markit manufacturing PMI reading was confirmed at 54.1 and while this offers some encouragement as it indicated manufacturing activity continued to grow at a steady pace in October the ISM manufacturing index was less bullish, coming in at 50.1 in October, only just above the 50.0 point mark that separates expansion from contraction. Construction spending also failed to significantly bolster an optimistic outlook for the US economy with spending in September increasing by a meagre 0.6% m/m, slightly less than the previous month’s figure of 0.7% m/m.

The dollar struggled to regain territory above Friday’s close on Monday as investors weighed up the manufacturing and construction data in the light of a potential interest rate rise this year. After opening lower at 96.768 the dollar index met with near term resistance towards 97.000 and spent much of the session just below this level. With today’s release of factory orders in the US and with tomorrow’s release of ADP employment change and trade balance data investors will have plenty to keep them engaged as they try and figure out if the Fed will indeed raise rates this year or if it will push back any rise until 2016 on any negative surprises in economic data.

The Australian dollar extended gains against the USD for the third straight session after the RBA left the interest rate unchanged at 2.0%, keeping them at a record low for a sixth straight month. The AUD found firm support around Monday’s close during overnight trading as it gained 0.7% against the greenback and rallied towards 0.7219 at one stage. Despite the short term upward momentum in the Aussie dollar, year-to-date the currency has lost over 12% against the USD and we could see this impulsive strength dissipate in the coming sessions as commodity price pressures continue to weigh heavily on exports of iron ore and coal owing to flagging global demand.

ISM manufacturing data for October struggling to regain momentum

NAPMPMI Index ISM Manufacturing 2015 11 03 07 52 34

AUD strengthens against USD for the third straight session

AUD Curncy Australian Dollar Sp 2015 11 03 08 15 17

Events for today

JP Market Holiday 

0930

UK

Oct

Markit/CIPS Construction

1445

US

Sep

ISM NY Manufacturing

1500

US

Sep

Factory Orders

1500

US

Nov

IBD Sentiment

Topics: US Fed, PMI, DXY, AUD
More from: Kash Kamal