Data released by the Institute for Supply Management showed that the US manufacturing sector recorded a contractionary reading of 48.5 points for the month of June. This is lower than the expected reading of 49.2 points and the index number in May of 48.7 points!
In fact, the June PMI was not only the fastest decline since February, but also marked the third straight month that the sector has seen contraction.
Link to the ISM Manufacturing PMI report for June
Survey respondents reported weaker demand even as the new orders index rose 3.9 points to 45.4. Closely watched employment and price indices also reflected weakness and pointed to easing price pressures during the month.
In a separate report, S&P Global Manufacturing’s final US PMI fell to 51.6 from 51.7 in June, pointing to “weak demand from both domestic and export markets.”
The report also noted that higher current production requirements helped boost employment to its fastest pace in 21 months while output price inflation slowed for a third straight month.
Link to S&P Global Final Manufacturing PMI Report for June
Market Reactions
US Dollar vs Major Currencies: 5 minutes
Comparison between the US dollar and major currencies Chart by TradingView
The US dollar posted bullish trends during the day against its major counterparts as rising US 10-year Treasury yields and the possibility of traders unwinding their risky positions ahead of potential catalysts this week helped boost the currency during the Asian and early European sessions.
The US dollar lost momentum at the start of the US trading session and was trading near intraday lows as the S&P Global Manufacturing PMI posted a downward revision for June.
Then the Institute for Supply Management downgraded its manufacturing PMI, which surprisingly contracted at a faster rate in June. Details like employment and prices also pointed to slower growth and easing price pressures.
The US dollar, however, rose broadly. Rising US Treasury yields may have been a factor in the dollar’s move higher, although speculation that a Trump presidency could lead to more stimulus and higher inflation may also have contributed to increased demand for the dollar.