The latest round of global manufacturing data released on Monday revealed diverging trends across major economies. In the United States, investors are closely watching the Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) for July, with market consensus expecting an improvement to 54 from June's 53.3 reading. If confirmed, this would match May’s four-year high, signaling robust expansion in the US manufacturing sector. The ISM Prices Paid component is anticipated to ease to 70.3, the lowest since the onset of the US-Iran conflict in February, though it remains well above the six-month pre-war average of 60. The ISM Manufacturing Employment Index, while improving, has largely remained in contractionary territory over the past four years. A strong PMI, coupled with expanding employment and persistent inflation, could bolster investor confidence in the US economy and support the case for further Federal Reserve tightening, potentially lending some support to the US Dollar. However, the Greenback’s gains may be limited, as the US Dollar Index (DXY) is at seven-week lows, influenced by a pause in hostilities in Iran and a sharp reversal in USD/JPY following a US-Japan coordinated FX intervention to support the Japanese Yen. The EUR/USD is trading at 1.1525, its highest since mid-June, and while positive US data could cap Euro appreciation, a reversal of the current bullish trend is unlikely without a significant shift in risk sentiment [1].
In the United Kingdom, the British Pound (GBP) retreated to the 1.3450 area against the US Dollar after the S&P Global Manufacturing PMI for July was revised down to 51.2 from a preliminary 52.8, indicating a moderate slowdown from June’s 52.5. This downward revision pressured the Pound, which had earlier rallied on news of a halt in Iran hostilities and the prospect of new peace talks. Market strategists at Brown Brothers Harriman see scope for a downward adjustment in UK interest rate expectations, which could act as a headwind for GBP. The swaps curve currently implies 50 basis points of tightening to 4.35% over the next twelve months, but this pricing may be revised lower. Additionally, the Bank of England has signaled a more cautious approach to quantitative tightening, potentially reducing the pace of bond holding reductions [2].
In Switzerland, the Swiss Franc (CHF) weakened as USD/CHF extended gains to 0.8090, following soft domestic inflation and manufacturing data. Swiss consumer prices rose by just 0.4% year-on-year in July, the slowest since March, and core inflation held steady at 0.3%. On a monthly basis, prices fell by 0.1%, the first contraction in six months. The SVME Manufacturing PMI dropped to 53.2 in July from 54.3 in June, missing expectations of 55.0 and marking its lowest since February. Nomura strategists expect Swiss inflation in Q3 to undershoot the Swiss National Bank’s forecast, reinforcing a softer outlook for the Franc. However, further upside for USD/CHF may be limited by broad-based US Dollar weakness, as official confirmation of joint FX interventions by Japan and the US has weighed on the Greenback. Japanese authorities reported yen-buying operations totaling up to $58.97 billion and signaled readiness for further intervention. Market sentiment has also improved following US President Donald Trump’s announcement of a pause in military action against Iran and the initiation of new negotiations, which has contributed to easing risk aversion. BNY Mellon strategists highlight that the coming week will test market resilience amid policy uncertainty, with US nonfarm payrolls and corporate earnings in focus as key determinants for the Federal Reserve’s policy credibility [3].
CONCLUSION
The latest manufacturing PMI releases highlight a strengthening US sector, contrasting with weaker data from the UK and Switzerland. While the US Dollar faces headwinds from global FX interventions and improved risk sentiment, robust US data could support the case for further Fed tightening. Meanwhile, the British Pound and Swiss Franc remain under pressure from softer domestic economic indicators and shifting central bank expectations.