ISM Manufacturing PMI Preview: Brazil's game at the same time matters no less than the numbers

The US ISM Manufacturing PMI is published on Monday, July 2nd, at 14:00 GMT. The forward-looking survey examines economic expectations and has been quite upbeat lately. The score of 58.7 points for May reflects robust growth, well above the 50-point threshold that separates expansion and contraction. A very similar figure is forecast for June: 58.3 points.

If the figure exceeds the round 60 level, it could boost the US Dollar. A drop towards 55 points would be a setback. While most Americans are employed in service-sector jobs, manufacturing positions are of high importance, especially politically. 

Apart from the headline figure, the Price Paid component is also of high importance. This indicator of inflation has been at record levels, reaching 79.5 points in May. A small correction to 78.2 is on the cards now. The Federal Reserve follows this figure as part of its inflation gauges, and markets follow.

In case the component drops towards 75 points, it would be a warning sign that inflation is losing steam. If it reaches the round number of 80, it would add to rate hike expectations.

Brazil is playing and Independence Day is close

The timing of the release is no less critical. The World Cup is played in Russia, and it has reached the Knockout stage. And while Americans have no interest in soccer (football in the rest of the world), other countries care and they are still in play.

European traders may be glued to their screens to see if Brazil, perhaps the most popular team in the world, can beat Mexico in the eighth-finals and advance to the quarter-finals. The match begins at the same time: 14:00 GMT. The data is released one hour ahead of the London fix and as stock markets are open. Traders may skip the data and pop up a beer, leaving the algorithms to do the work.

Also, the Independence Day holiday in the US may have some effect. 4th of July is on Wednesday, but some traders may have taken extended weekends and are coming back for the Non-Farm Payrolls.

These distractions can influence liquidity and, therefore, trigger broader movements in markets. A little beat or a slight miss on expectations can result in an exaggerated response. 

Conclusion

The ISM Manufacturing PMI is important for the NFP and inflation. Also, the unique timing opens the door to a larger-than-normal reaction.