ISM Non-Manufacturing PMI Shows US Strength
- ISM Non-Manufacturing much higher than anticipated
- Continuing US strength overall
- US dollar main beneficiary
The ISM Non-Manufacturing PMI numbers for October came out much stronger than anticipated on Tuesday. This shows that the US economy continues to outperform any of the other global economies and suggests that, perhaps, we will see more of the same. The immediate reaction was to see the US dollar rally significantly against almost everything across the board, be it currencies, commodities, and much more.
The Non-Manufacturing PMI figures came out at 54.7, as opposed to the projected 53.5 for the month. It was anticipated to be strong, but not nearly as strong as we saw. With that, it’s likely there will be a continued push towards the United States, despite the fact that some had suggested that the Federal Reserve was sitting on pause due to concerns about the economy.
As Jerome Powell suggested, it is the rest of the world that the Federal Reserve is concerned about. Currently, it appears that the US economy is steaming right along.
The previous reading of 52.6 was relatively well received, considering it was three points under forecast. Traders had written this off as a potential “blip on the radar” and continued to buy stocks based on the fact that it was positive, and that the Federal Reserve was likely to step in and liquefy the markets further.
Now that we have seen that play out, the question becomes whether or not the rest of the world can catch up. It should be noted that recent German PMI figures have been less than stellar.
Overall money flow
If Tuesday has shown us anything, it is that the overall flow of money around the world continues to go into the United States. Finding high-quality assets will continue to be the main driver of trading for asset managers around the world, which typically means large US companies.
This will be reflected in the currency markets as the US dollar strengthens. Ultimately, the US dollar should find plenty of buyers. Although the liquidity measures taken by the Federal Reserve and the repo operations lately may have eased some of the concerns about dollar liquidity, the reality is that it still the strongest currency out there for a whole host of reasons, not just liquidity issues.
As asset managers around the world are trying to find safety in a slow-growth environment, it looks as if the United States will be the main beneficiary going forward. In short, it will be more of the same: US dollar strength, US stock market strength, and possibly even the bond markets getting a slight bid as foreign investors try to park money in one of the most liquid markets in the world.