- David Sloan, a senior economist at 4cast Inc.
The world's largest economy continues to disappoint. The Fed cannot blame the weather for weak performance in May, hence, they will have to look for another reason. This week the greenback has another great opportunity to perform a rally versus the Euro, if only statistics from the labour and trade sectors will not disappoint. Moreover, we should keep in mind usual month-end needs, as demand for the Dollar is usually boosted by companies, plants and mutual funds have to put money into stocks. For now, the economy fails to deliver. Monday's report from the Institute for Supply Management or the ISM, showed activity in the key manufacturing sector ticked down in May, as orders and productions eased over the corresponding period. The gauge of activity stood at 53.2 in May, following April's 54.9, with 50 being the dividing line between expansion and contraction. Analysts, however, called for a gain to 55.5. On the back of the disappointing figures, the most traded currency pair bounced back from 1.36-mark, reaching 1.3627, as manufacturing PMI is a key measure of overall economic health in the country, since companies usually respond quickly to any changes in market conditions. Nevertheless, the market reaction was subdued, as the U.S. economy is mostly driven by services sector.
Regarding the unemployment rate and payrolls, Fed's Evans claimed that an uptick in jobless rate will not be a surprise, meaning policymakers are preparing for weak indicators.
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