Strong ISM manufacturing bolsters Fed hike case - ING

Analysts at ING explain: "It’s been a positive start to what is set to be a bumper data week in the US. The ISM manufacturing survey soared back up to 57.8, comfortably above consensus and driven by an encouraging pick-up in new orders and production. The manufacturing sector is clearly a source of strength in the US right now, and the latest survey readings are a far cry from the sub-50 lows seen at the beginning of 2016."

"But in its quest for evidence that the dip in economic activity in the first quarter was “transitory”, the Fed will be more interested in Friday’s US jobs report. We’re looking for a robust pick-up in wage growth on Friday, which could see market pricing edge slightly more inline with the Fed’s hawkish hike ambitions – although the broader lack of core inflationary pressures recently means investors are likely to remain fairly sceptical about the Fed’s plan to hike four more times by the end of 2018."

"But in the near-term, given the tight labour market and a decent pick-up in domestic demand (which could see 2Q GDP return to the 3% region), we think a September hike still looks likely."