THE TAKEAWAY: U.S. ISM Manufacturing Beats Expectations > Industry Rebounds > USDollar Index Bearish
Manufacturing expanded at a faster-than-expected pace in June, supporting prior suggestions that supply chain disruptions from Japan were harming industry in the United States. The Institute of Supply Management’s index on factory production rose to 55.3 from 53.5 in May, after a Bloomberg News survey forecasted a fall to 52.0. The print bucks a four-month deterioration in the index.
The data comes as a bit of a surprise as manufacturing readings from China and Europe have shown that industry across the world is slowing, not just in the United States. In fact, the Euro-zone’s most recent reading showed that their gauge of manufacturing slipped to an eighteen-month low.
Loonie-Franc 1-minute Chart: July 1, 2011
Charts created using Strategy Trader– Prepared by Christopher Vecchio
While the U.S. Dollar was relatively unchanged on the news, risky assets found support as stronger-than-expected manufacturing data out of the United States is bullish for global growth. As such, one of the more active currencies following the release was the CAD/CHF, or Loonie-Franc, pair. The Canadian Dollar is typically more sensitive to U.S. data than the Greenback is, considering that as the number one exporter of oil to the United States, poor data out of the United States suggests a slowdown in demand for oil, and thus, weaker Canadian growth over the medium-term.
As such, the Swiss Franc, which had already depreciated the most on the day against the major currencies, fell even further, especially against the Canadian Dollar, which is considered a risky asset, on the move. The CAD/CHF pair jumped over 70-pips on the release.
U.S. ISM Manufacturing: July 2008 to Present
Courtesy: Bloomberg
Following the release, the Dow Jones FXCM Dollar Index fell as investors ran towards higher yielding assets, from as high as 9614.59 prerelease to as low as 9573.35. At the time this report was written, the index was trading back at 9578.84.
Written by Christopher Vecchio, Currency Analyst
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