At 10:00 AM on Thursday, April 1st, the Institute for Supply Management releases the results of their monthly manufacturing survey. Forex traders consider this release to be important in regards to market moving ability.
This survey focuses on the condition of US Industry by asking pertinent questions to a sampling of 400 manufacturing executive purchasing managers. Questions relating to new orders, inventory, deliveries and employment are among those asked. The survey seeks to forecast future changes in the Gross Domestic Product GDP. Interestingly, manufacturing accounts for a small part of the GDP, however changes in manufacturing are proven to be primary drivers/predictors in an increasing or declining GDP. This is due to the fact that business reacts quickly to changing economic conditions. It is considered a leading indicator among economists to predict sentiment toward labor and inflation. Labor and inflation are the prime movers behind growth and contraction in the economy. The headline number in the release above 50 indicates an economic expansion. If the figure is below 50, an economic contraction is thought to be underway.
This figure has stayed solidly above the critical 50 point for some time. It is projected to uptick a bit to 57 this release. I would not be surprised if the number beats estimates despite the job and deficit situation domestically. The EUR/USD moved below the 1.3300 level prior to Euro strength lifting the pair several hundred pips. The job situation in America is starting to weigh on the Greenback. All eyes will be on the NFP release Friday.
David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.
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