- The ISM manufacturing PMI rose to 49.0 in June, exceeding consensus.
- The US dollar continues in decline, approaching minimums of several years.
Economic activity in the US manufacturing sector won some rhythm in June, with the PMI manufacturing ism progressing 49.0 Since 48.5 in May, exceeding the expectations of experts of 48.8.
The employment index fell slightly to 45.0 from 46.8 in May, which suggests that the payrolls of the sector face some winds against. Meanwhile, the paid price index, which measures inflation, rose a bit to 69.7 from 69.4. Finally, the new orders index was reduced to 46.4 from 47.6 in the previous reading.
From the statement: “As for production, the production index increased month by month and is now in expansion territory; however, the employment index fell deeper into contraction, since managing the number of employees remains the standard, instead of hiring. The mixed indicators in production suggest that companies are still cautious in their hiring, even with an increase in production,” said Susan Spence, MBA Manufacturing Business Survey Committee of the Institute for Supply Management (ISM).
Market reaction
The US dollar (USD) operates with a marked bearish bias on Tuesday, around minimums of several years around 96.60 while investors evaluate published data as well as President Powell’s comments in the ECB forum.
GDP FAQS
The gross domestic product (GDP) of a country measures the growth rate of its economy for a certain period of time, normally a quarter. The most reliable figures are those that compare GDP with the previous quarter (for example, the second quarter of 2023 with the first of 2023) or with the same period of the previous year (for example, the second quarter of 2023 with the second of 2022).
The annualized quarterly figures of GDP extrapolate the growth rate of the quarter as if it were constant for the rest of the year. However, they can be misleading if temporary disturbances affect growth in a quarter but it is unlikely that they last all year, as happened in the first quarter of 2020 with the burst of the coronavirus pandemic, when the growth collapsed.
A higher GDP result is usually positive for the currency of a nation, since it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting greater foreign investment. Similarly, when GDP falls it is usually negative for the currency.
When an economy grows, people tend to spend more, which causes inflation. The Central Bank of the country then has to raise interest rates to combat inflation, with the side effect of attracting more world investor capital tickets, which helps the appreciation of the local currency.
When an economy grows and GDP increases, people tend to spend more, which causes inflation. Then, the country’s central bank has to raise interest rates to combat inflation. Higher interest rates are negative for gold because they increase the opportunity cost to keep gold in the face of placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for the price of gold.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
