• Decline Expected For June
• Downbeat Rumblings
• Global Economic Cool-down

After a string of disappointing PMI data from nations across the globe, all eyes are now on the US manufacturing ISM. Due for release at 15:00 BST, this indicator provides speculators with a good picture of how the manufacturing sector is performing and its direction of travel over the coming months.

Tuning in to market chatter surrounding the event, we are hearing downbeat rumblings. TD Securities analysts have forecast a slump in today’s ISM data, with the global economic slowdown expected to have taken a toll on American export demand and domestic growth. “During the month, our call is for the ISM manufacturing index to fall to 51.5, down from 53.5 the month before, underscoring the dramatic deceleration in the sector”, the analysts said.

But while many other nations’ manufacturing sector’s linger below the growth rate of 50, the TD Securities analysts were also quick to point out the positives to take from a +50 score. “Despite the dip in the headline index, it will mark the third year of uninterrupted growth for the manufacturing sector, which continues to be one of the few bright spots for the economic recovery”, they added.

Global Economic Cool-down

A report released last week revealed that US GDP had continued to suffer at the hands of the global economic slowdown which was quashing demand for goods and services. The Commerce Department said Thursday that GDP remained unrevised at 1.9 percent for Q1, representing a significant cool-down from 3.0 percent in October-December.

“Now that every major nations PMI is at or below 50, all eyes are on the US manufacturing ISM”, said Ashraf Laidi (pictured), chief global strategist at City Indx/FX Solutions. “Markets were consolidating large Friday moves with a slight bias toward USD weakness”, moving into the hour leading up to the ISM results, he added.

A host of disappointing PMI data from across the euro zone has weighed on market expectations for the US data which would undoubtedly need support from foreign markets in order to strengthen further. Whilst reducing the speed at which it declined, UK PMI continued to contract in June. While the euro zone’s result overall was revised down from 44.8 to 45.1.

Decline Expected For June

“Markets await ISM manufacturing that is due at 10:00 am ET [15:00 BST] and is expected to decline in June to 52.1 from previous 53.5.US manufacturing ISM is the only G10 ISM remaining in expansion territory”, Laidi added (see chart right for Philly Fed predictions).

A lower ISM result – as expected by most speculators – would reflect the general mood of US markets, which have continued to yield downbeat data over the past few months. The U.S. economy created only 69,000 jobs in May, the fewest in a year according to the last payrolls report. While the unemployment rate rose to 8.2 percent last month from 8.1 percent in April. A further nonfarm payrolls report due out Friday is expected to reveal more about the situation in the jobs markets later this week.

Sarah Cox, Markets Writer. ForexSpace.com