The manufacturing version of the ISM index - the key index from the US, is the crucial piece of data today with the index expected to go down for the second month in a row, from 50.8 to 50.3 pts. Looking at regional indicators we would not be surprised to see it below 50.
The US front-end data deteriorated just as the FOMC officials started talking more openly about prospects of the first hike this year (and second in a cycle). Frankly, May looks like a disaster in this respect. Every single indicator not named Chicago Fed (which is very far on the list of market movers) showed deterioration and while high profile indicators like flash PMI and Chicago PMI pointed at modest declines, NY, Richmond and Dallas saw massive tumbles. The ISM consensus has been based on these more high profile indicators so obviously the risk is skewed to the downside.
Source: Bloomberg, XTB
While the headline will be crucial, investors will look at the structure as well with employment, prices and new orders receiving special attention (in this order). Do notice that employment and prices improved in April even as the headline ticked down.
Even though we expect a weak ISM, it does not need to translate into weaker USD because the greenback has already been under an immense pressure today.
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