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 for January at 15:00 GMT this Thursday. The index is expected to remain in contraction territory for the third straight month and come in at 48 for January. Given that the Fed looks more at inflation than growth, investors will keep a close eye on the Prices Paid sub-component, which is anticipated to tick higher to 39.5 from 39.4 in December.

How could it affect EUR/USD?

Ahead of the key release, the US Dollar is pressured by the prospects for a smaller Fed rate hike and the disappointing release of the US ADP report on private-sector employment. A weaker-than-expected ISM Manufacturing PMI will be seen as another sign of a slowdown in the US economy and exert additional downward pressure on the Greenback. This, in turn, should allow the EUR/USD pair to capitalize on its intraday positive move back above the 1.0900 round-figure mark.

Conversely, a stronger print is unlikely to provide any respite to the USD bulls amid expectations that the Fed will slow the pace or even signal an end to the rate-hiking cycle. This, in turn, suggests that the path of least resistance for the USD is to the downside and supports prospects for a further near-term appreciating move for the EUR/USD pair. That said, any immediate market reaction is likely to be limited as the focus remains on the FOMC decision, due later during the US session.

Valeria Bednarik, Chief Analyst at FXStreet, offers a brief technical overview of the EUR/USD pair: “In the near term, and according to the 4-hour chart, the pair is developing above a flat 20 SMA, which reflects the consolidative phase the pair is undergoing since mid-January. The longer moving averages, however, head higher below the shorter one, in line with the wider long-time bullish stance. Finally, technical indicators crossed their midlines into positive territory, heading modestly higher.”

Key Notes

  •  EUR/USD Forecast: Battling 1.0900 ahead of central banks’ decisions

  •  EUR/USD Price Analysis: Topside continues to look at 1.0930

  •  EUR/USD: Forecasts upgraded to 1.12 by end-2023 and to 1.16 by end-2024 – ABN Amro

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).