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Risk On! As ISM Manufacturing Beats

Last updated 11/2/2009 10:45 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

The ISM Manufacturing report blew past estimates printing at 55.7 versus forecasts of 50 as it remained above the key 50 boom/bust line for the third month in a row. More importantly the employment subcomponent of the report rose a whopping 7 points printing at 52.1 versus 46.2 the month prior.

This is the first time in more than a year that ISM Manufacturing employment data  rose above the 50 boom/bust line which augurs well for the Friday’s NFP report, although for the market to get truly bullish US labor data, Wednesday’s ISM Non Manufacturing report should reveal the same type of upside surprise.

In addition to the much better than expected ISM data, the markets were also greeted with a sharp jump in US  Pending Homes sales data which rose 6.1% versus forecasts of 0.0% gain. Overall, today’s economic news was an unambiguous boost to the risk trade suggesting that US economic recovery appears to be sustainable for the time being.    

Risk currencies skyrocketed in the aftermath of the release with EUR/USD clearing the 1.4800 level with force. As we noted earlier, sustainability of the recovery trade remains the key driver to further gains in high beta FX. That is turn will be highly depended on the improvement in labor market conditions which is why the longer term direction of FX will be governed by US NFP data due at the end of this week. If markets become confident in the sustainability thesis, a retest of EUR/USD 1.5000 could be coming.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.