USD/CAD extends upside as US Dollar recovers ahead of US Manufacturing PMI (2024)

  • USD/CAD rises further to 1.3700 as the US Dollar bounces back with US ISM Manufacturing PMI in focus.
  • An expected decline in the US core PCE inflation boosts Fed rate-cut hopes.
  • Higher-than-expected increase in Canadian inflation eases hopes of BoC’s back-to-back rate cuts.

The USD/CAD pair extends its upside to near the round-level resistance of 1.3700 in Monday’s New York session. The Loonie asset strengthens as the US Dollar (USD) recovers more than half of its intraday losses after posting a fresh three-day low near 105.40.

Market sentiment remains positive as investors expect that the Federal Reserve (Fed) will begin reducing interest rates from the September meeting. S&P 500 futures post significant gains in European trading hours. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, bounces back to near 105.75. 10-year US Treasury yields jump to near 4.45%.

The expectations for Fed rate cuts in September were boosted by soft United States (US) core Personal Consumption Expenditure Price Index (PCE) data for May. Annual core PCE data, which is Fed’s preferred inflation measure, grew at a slower pace of 2.6%, as expected, from the prior release of 2.8%.

On the economic front, investors await the US ISM Manufacturing PMI for June, which will be published at 14:00 GMT. The PMI report is expected to show that output in the manufacturing sector improved to 49.0 from the prior release of 48.7 but remained below the 50.0 threshold.

Meanwhile, the Canadian Dollar weakens despite hotter-than-expected inflation data for May eased expectations of subsequent rate cuts by the Bank of Canada (BoC). The BoCbegan its rate-cutting cycle from June.

Economic Indicator

ISM Manufacturing PMI

The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US manufacturing sector. The indicator is obtained from a survey of manufacturing supply executives based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that factory activity is generally declining, which is seen as bearish for USD.

Read more.

Next release: Mon Jul 01, 2024 14:00

Frequency: Monthly

Consensus: 49.1

Previous: 48.7

Source: Institute for Supply Management

The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) provides a reliable outlook on the state of the US manufacturing sector. A reading above 50 suggests that the business activity expanded during the survey period and vice versa. PMIs are considered to be leading indicators and could signal a shift in the economic cycle. Stronger-than-expected prints usually have a positive impact on the USD. In addition to the headline PMI, the Employment Index and the Prices Paid Index numbers are watched closely as they shine a light on the labour market and inflation.

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USD/CAD extends upside as US Dollar recovers ahead of US Manufacturing PMI (2024)


How does ISM Manufacturing PMI affect the dollar? ›

United States ISM Manufacturing PMI

A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that factory activity is generally declining, which is seen as bearish for USD.

What is the US PMI in August? ›

The U.S. manufacturing sector contracted in August, as the Manufacturing PMI® registered 47.6 percent, 1.2 percentage points higher than the reading of 46.4 percent recorded in July. "This is the 10th month of contraction and continuation of a downward trend that began in June 2022.

Is high manufacturing PMI good or bad? ›

A PMI reading over 50 or 50% indicates growth or expansion of the U.S. manufacturing sector as compared to the previous month, while a reading under 50 suggests contraction. A reading at 50 indicates that the number of manufacturers reporting better business is equal to those stating business is worse.

What does manufacturing PMI tell us? ›

The Purchasing Managers' Index (PMI) is a measure of the prevailing direction of economic trends in manufacturing. The PMI is based on a monthly survey of supply chain managers across 19 industries, covering both upstream and downstream activity.

What is the current US PMI level? ›

US ISM Services PMI is at a current level of 48.80, down from 53.80 last month and down from 53.90 one year ago. This is a change of -9.29% from last month and -9.46% from one year ago.

What is the prediction for PMI? ›

Manufacturing PMI in the United States is expected to be 53.00 points by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the United States Manufacturing PMI is projected to trend around 52.00 points in 2025, according to our econometric models.

What is the manufacturing PMI in the US in 2024? ›

U.S. Manufacturing Purchasing Managers' Index (PMI) 2022-2024. In June 2024, the value of the Manufacturing Purchasing Managers' Index (PMI) in the United States stood at 48.5.

How does PMI affect currency? ›

Usually, when the PMI in a particular country improves the currency of that country gets a boost. For example, if the PMI in the eurozone (or one of the major eurozone economies) improves the euro experiences upward pressure. Conversely, if the PMI declines the currency tends to weaken.

How does ISM services PMI affect the stock market? ›

If the index reports better than expected figures (above 50 and higher than the forecast), it typically strengthens the USD as investors anticipate a healthier economy, which may lead to higher interest rates.

How to interpret ISM manufacturing PMI? ›

The ISM Manufacturing Index shows whether manufacturing and the economy as a whole are expanding or contracting. According to the ISM: “A Manufacturing PMI® reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining.

Why is ISM Manufacturing PMI important? ›

ISM PMI data is considered to be a leading indicator of economic trends. Not only does the ISM manufacturing index report information on the prior two months, but it also outlines long-term trends that have been building over time based on prevailing economic conditions.

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