USD news - page 20
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US ISM Manufacturing Index Hits 5-Month High
The US ISM manufacturing index rose to 53.2 for November from 51.9 in October. This was the strongest reading for five months and above expectations of a more modest increase to 52.1.
Of the 18 manufacturing industries, 11 reported growth for November.
New orders increased to 53.0 from 52.1 with production rising to 56.0 from 54.6 previously.
Supplier deliveries also slowed, which suggests increased capacity constraints, and a further decline in inventories will maintain pressure for increased production levels, especially with the customer inventories reading also below 50.0. The order backlogs index did rise for the month, but remained below the 50.0 reading, which will be of some concern.
The employment component declined to 52.3 from 52.9, but still suggests that employment is increasing with little insight into Friday’s employment data.
The prices index was unchanged at 54.5, while the exports index edged lower to 52.0 from 52.5. The data suggests a strong dollar is having only a limited impact at this stage, but is a restraining influence on both prices and overseas orders.
The rhetoric from manufacturers was generally positive with confidence in the growth prospects for 2017.
Manufacturing should maintain a firm tone in the short term and there are no major policy implications at this stage. The data will certainly not discourage a December rate hike, but there will be no increase in expectations surrounding a faster pace of tightening next year.
The dollar was unable to extend gains given that there had already been a strong tone into the release as EUR/USD found support just below 1.0600. Treasuries remained firmly on the defensive, but resisted further losses.
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November nonfarm payrolls +178K vs +180K expected
Highlights of the November 2016 US nonfarm payrolls report:
Wages and inflation:
November ISM New York 52.5 vs 49.2 prior
November ISM-New York index
November 2016 US ISM non-manufacturing PMI 57.2 vs 55.4 exp
Details of the November 2016 US ISM non manufacturing PMI data report 5 December 2016
Q3 2016 US non-farm productivity revision 3.1% vs 3.3% exp
Q3 2016 US non farm productivity and labour costs revisions 6 December 2016
October 2016 US factory orders 2.7% vs 2.6% exp m/m
October 2016 US factory orders and durable goods revisions report
US October Factory Orders Rise 2.7%, Largest Gain For 16 Months
US factory orders increased 2.7% for October from an upwardly-revised 0.6% gain the previous month. This was slightly above consensus expectations of a 2.5% gain and the fourth consecutive increase and the largest increase since June 2015, although there was still a 2.0% annual decline.
Excluding transport, there was a 0.7% monthly increase following a 0.6% gain for September with orders declining 2.6% over the year. Orders were inflated by a strong increase in aircraft orders for the month.
Shipments increased 0.4% for the month, the seventh gain in the last eight months, while unfilled orders broke a sequence of four consecutive losses with a 0.7% gain, the largest increase for over two years.
Inventories were unchanged for the month following a slight 0.1% decline the previous month with a 1.3% annual decline. The inventory/shipments ratio was unchanged at 1.34 for the month.
Excluding aircraft, there was a 0.2% increase in capital goods orders. Shipments declined 0.1% for the month, which will have marginal downward impact on fourth-quarter GDP estimates.
There will still be doubts surrounding investment levels, but he data suggests that the manufacturing sector was gaining some strength ahead of the November Presidential election. The concern now will be that renewed dollar strength following the election will tend to halt the recovery as exports are subjected to renewed pressure and imports increase.
There was no significant market reaction as consolidation continued after Monday’s Italian referendum with the EUR/USD unable to extend a recovery. Treasuries and equities were both in slight positive territory.
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USD: Any N-Term Correction Temporary & Fundamentally Unjustified
The correction lower for the US dollar in the near-term is likely to prove only temporary with no clear fundamental justification for a sustained reversal of the stronger US dollar trend.
Long positions have likely been lightened after the US dollar failed to build on recent gains following the Italian public’s rejection of constitutional reforms. The broad financial market fallout has been limited with Italian banks bearing the brunt of the initial negative market impact reflecting concerns that they will find it more challenging to raise private funds to recapitalise.
Fundamentals still remain supportive for stronger supported by the widening of yield spreads in the favour of the US. The release yesterday of the latest ISM non manufacturing survey signalled that the US economy is continuing to expand more solidly heading into year end. The survey revealed that business confidence rose to its highest level since October 2015. The composite ISM reading for November appears consistent with economic growth of between 2.5% to 3.0% in Q4. The employment sub-component was even more encouraging rising to 58.2 in November signalling that employment growth is likely to accelerate and is more consistent with robust job gains of over 200/month. It supports our view that the November employment report could have again under reported employment growth which is likely to be revised higher in time. The November employment report revealed an even tighter than expected labour market with the unemployment rate dropping sharply to 4.6%. At the current juncture, we are more inclined to view the softer earnings growth as temporary within a strengthening trend. A tighter labour market supports our view that the Fed will have to speed up the pace of rate hikes in the coming years offering more support for the US dollar.
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US EIA weekly oil inventories -2389k vs -1500k exp
US EIA weekly oil inventory data report week ending 2 December 2016
US initial jobless claims 258K vs 257K est
Prior week 268K