The latest data from May indicates a weakening in the US manufacturing sector, with the ISM Manufacturing Purchasing Managers Index (PMI) declining to 48.5, falling short of expectations that had forecasted a figure of 49.5. This marks the third consecutive month of contraction for manufacturing. The results have raised concerns about the overall health of the US economy, contributing to a softening of the US dollar, which reached a seven-week low.
Crude oil prices experienced a bump following OPEC+’s decision to maintain its output increases, with production set to rise by 411,000 barrels per day in July. This decision has provided support for the Canadian dollar, which is closely tied to commodity prices. The USD/CAD currency pair is seeing defensive trading, hovering around 1.3715 during the early Asian session.
Adding to the economic uncertainty, US President Trump announced plans to double import tariffs on steel and aluminum, starting Wednesday. This move has raised alarm amongst global steel producers and intensified fears of a trade war. The market’s response to these tariff concerns has heightened a trend of decreased confidence in the US economy, prompting traders to exhibit a more risk-averse posture.
Looking ahead, the Job Openings and Labor Turnover Survey (JOLTs) report is set to be released later in the day, which may offer further insights into the labor market dynamics. The upcoming US Nonfarm Payrolls report for May, expected to indicate a job growth of 130,000, is also under close observation, particularly as the unemployment rate is predicted to hold steady at 4.2%. A stronger than anticipated jobs report may provide a boost to the dollar, potentially mitigating some of the downward pressure it has experienced.
In summary, with mixed signals from the manufacturing sector and the impending tariff adjustments, market participants are leaning towards caution as they navigate the current economic landscape.
