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ISM Manufacturing PMI Set to Drive US Dollar

H.S. Borji
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ISM Manufacturing PMI Set to Drive US Dollar

The US manufacturing industry continued to rebound in March from a weather-induced slowdown, according to a consensus of market analysts tracking monthly PMI figures.

Tuesday’s report on US manufacturing PMI, courtesy of the Institute for Supply Management, could determine the direction of the US dollar ahead of Friday’s nonfarm payrolls report. The ISM’s monthly manufacturing PMI is expected to rise 0.7 percentage points to 54 in March, after rebounding sharply the previous month.

Manufacturing activity fell to an eight-month low at the beginning of the year, as inclement weather disrupted inbound and outbound shipments. However, 14 of the 18 manufacturing sub-sectors rebounded in February, offering hope US factories would regain momentum in the spring.

A strong PMI reading could be a catalyst for markets still driven by fundamentals. Because manufacturing output is a key contributor to gross domestic product, strong PMI could boost market sentiment toward US recovery.

The US dollar index was slightly lower Monday, hovering just above the 80 mark. The greenback lost ground in Europe and North America, but continued to rise versus the Japanese yen.

The euro shrugged off weak consumer inflation data. The EURUSD pair was trading at 1.3775 in North America’s afternoon session, a gain of more than 0.1 percent.

The British pound gained more than 0.2 percent to 1.6678, despite weaker than forecast mortgage approval and consumer credit data.

The Canadian dollar posted a strong rally before paring its gains in the afternoon session. As of 17:30 GMT, the USDCAD pair was trading at 1.1050.

The US dollar made up ground versus the Japanese yen, breaching the 1.03 level for the first time since March 11.

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