The world’s largest economy has today posted Manufacturing activity gains at the fastest pace in five months. The ISM Index has advanced from 54.4 last month to 56.9 this month. This release represents a significantly better than expected growth in this sector amid forecasts for 54.0. Economists are arguing that Manufacturing is at the head of the economic recovery in the US and we can clearly see that the markets have responded accordingly, US Stock markets have gained close to 0.5% in trading today.

CIPS Manufacturing, the UK gauge has shown expansion at 54.9, versus last months figure of 53.5. The figures are positive ahead of the Bank of Englands meeting this week and the likelihood of additional QE this month or even this year is diminishing.

The key trading focus this week is from the Fed, economists from Goldmand Sachs and the Bank of America suggest that the US asset purchase program will most probably total $500 billion in the next 6 months. Traders are currently speculating on the amounts of liquidity that will be pumped into the US economy on a month by month basis. The USD as a result is coming under pressure, a close above 1.60 is looking likely with good potential for market movement towards a break of resistance at 1.6107. Risk appetite as a result of the Fed’s QE program is likely to see further stock market gains and dollar weakness this week.

Regards

Luke Zorab
Torfx Currency Analyst
(01736) 335285