Positive Surprise In US ISM
The US manufacturing ISM index rose to 54.8 in April from 53.4 (cons: 53.0, UBSe: 53.5) giving the dollar a slight boost in an otherwise quiet session. The dollar rallied against many of its peers with the USDJPY gaining 50 pips, as US treasury yields rose. The ISM registered broad based growth with stronger new orders, production, employment, supplier deliveries and exports but a slight drop in construction and public sector spending. The rise in the employment index is inline with the regional manufacturing reports and our US economists expect this to indicate a decent manufacturing hiring in Friday’s employment report. The newswires were busy with Fed speakers yesterday with Kocherlakota, Fisher and Lockhart sounding generally against any further easing. Even Charles Evans, a notable dove, acknowledged that inflation risks today are higher than they were a year ago. With most of Europe on vacation yesterday, data flow was thin. UK Manufacturing PMI fell to a headline reading of 50.5 after a downwardly revised 51.9 (52.1) in April. Most of the components of the report were weak with new orders at the lowest levels since November and exports at the lowest level since May 2009. After the surprisingly soft Q1 GDP print, the PMI readings will be an important focus for the BoE so today’s data may prompt further cautious tones. The more important services indicator is due on Thursday. Last week we lifted our GBP forecasts and with our 3m GBPUSD target now almost reached, we are cautious of further upside from current levels. Ahead today, we have PMI numbers due in the European countries and BoE governor Mervyn King’s speech.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank