When is the US ISM Manufacturing PMI and how could it affect EUR/USD?

US ISM Manufacturing PMI overview

The Institute of Supply Management (ISM) will release its latest manufacturing business survey result, also known as the ISM Manufacturing PMI at 15:00 GMT this Tuesday. The index is anticipated to decline further from 58.7 in the previous month to 57.5 in January – marking the third successive month of fall. Nevertheless, the gauge will provide a fresh insight into the manufacturing sector activity and the performance of the economy as a whole.

As Joseph Trevisani, Senior Analyst at FXStreet, explains: “Manufacturing sentiment depends on incoming orders. Though the new business index is expected to rise, its precursors and the entire US holiday season were poor. General demand is still expected to be high after 18 months of varying degrees of denial or scarcity but soaring inflation, 7% in December, may be cutting into family budgets and draining consumption.”

How could it affect EUR/USD?

Ahead of the key release, the US dollar was weighed down by the ongoing retracement slide in the US Treasury bond yields. A weaker than expected reading would be enough to exert additional pressure on the buck and assist the EUR/USD pair to build on its recent recovery move from the lowest level since June 2020.

That said, the prospects for a faster policy tightening by the Fed should act as a tailwind for the buck and cap gains for the major. A stronger print will reaffirm hawkish Fed expectations and attract fresh buying around the greenback. The immediate market reaction, however, is likely to remain limited as investors might refrain from placing aggressive bets ahead of the European Central Bank meeting on Thursday.

Key Notes

  •  ISM Manufacturing PMI January Preview: Fed policy counts on a continuing US expansion

  •  EUR/USD Outlook: 1.1300 could cap the corrective bounce ahead of ECB on Thursday

  •  EUR/USD Price Analysis: Immediately to the upside comes 1.1300

About the US ISM manufacturing PMI

The Institute for Supply Management (ISM) Manufacturing Index shows business conditions in the US manufacturing sector. It is a significant indicator of the overall economic condition in the US. A result above 50 is seen as positive (or bullish) for the USD, whereas a result below 50 is seen as negative (or bearish).