Attention shifts to Wednesday’s release of the June ISM Manufacturing Purchasing Managers Index (PMI), one of the most closely followed indicators of activity in the US manufacturing sector and an important barometer of the broader economy.

Markets expect the headline index to remain unchanged at 54, matching May’s print. That would be the sixth consecutive month with the index above the key 50.0 level that separates expansion from contraction, suggesting manufacturing activity continues to expand despite ongoing challenges.

But the story of the manufacturing sector is only part of the story. The broader US economy has continued to prove impressively resilient thanks to better-than-expected growth and a labour market that has largely held firm despite high interest rates. That resilience has kept the narrative of US exceptionalism alive, even as factory activity remains muted.

But it will be more than just the headline figure that matters for investors. Signs of improving demand, new orders or employment could raise confidence that manufacturing is slowly stabilising, while another disappointing report would add to concerns that the sector is struggling to gain meaningful traction despite the economy’s broader strength.

What to expect from the ISM Manufacturing PMI report?

The manufacturing sector advanced to levels last seen nearly two years ago in May, with the business activity managing to stay in the expansion territory for the fifth consecutive month, extending the auspicious start to the year.

The biggest jump was in new orders, with the related index climbing to 56.8, its highest in the past four months, suggesting demand remained solid. At the same time, price pressures eased as the Prices Paid Index fell to 82.1 from 84.5, showing that inflationary pressures in the manufacturing sector appear to be slowly cooling. The picture in the labour market has also improved after the Employment Index rose to 48.6 from 46.4 in the prior month, but it still remained well short of the 50.0 mark, signalling that hiring conditions are still tough.

A reading above 50.0 on the ISM Manufacturing PMI is generally considered a sign of expansion in factory activity, with a reading below that point indicating contraction. However, history suggests that sustained levels above 42.5 are still generally consistent with growth in the overall US economy.

A stronger-than-expected PMI would likely boost confidence in the resilience of the US economy for markets and underpin equities and broader risk sentiment.

But the implications for the US Dollar are less straightforward. A stronger report could also stoke expectations that the Federal Reserve (Fed) will hold interest rates at restrictive levels for longer, providing more support for the currency. A stronger report tends to favour the Greenback. On the flip side, a softer-than-expected reading could raise concerns about the manufacturing outlook and dampen sentiment.

When will the ISM Manufacturing PMI report be released, and how could it affect EUR/USD?

The ISM Manufacturing PMI report is scheduled for release at 14:00 GMT on Wednesday.

Prior to the data release, EUR/USD has managed to extend its rebound from last week’s multi-month troughs, although extra gains seem to have met a tough barrier ahead of the 1.1450 level. 

Pablo Piovano, Senior Analyst at FXStreet, explains that further advances need to initially clear 1.1450 to attempt a move toward the weekly peak at 1.1622 (June 15). Immediately to the upside comes the critical 200-day SMA at 1.1657, preceding the weekly high at 1.1685 (May 29).

Piovano also noted that on the downside, the pair faces initial contention at the 2026 bottom of 1.1324 (June 24). A breach below this level could spark a likely challenge to the 1.1300 round level, ahead of the weekly floor at 1.1210 (May 29, 2025).

Piovano added that the outlook remains tilted to further weakness as long as spot trades below its 200-day SMA.

He also pointed out that the Relative Strength Index (RSI) hovers around 37, indicating a pick-up in the bearish stance, while the Average Directional Index (ADX) around 36 suggests that the current trend is quite firm.

Economic Indicator

ISM Services New Orders Index

The ISM Non-Manufacturing PMI released by the Institute for Supply Management (ISM) shows business conditions in the US non-manufacturing sector, taking into account expectations for future production, new orders, inventories, employment and deliveries. It is a significant indicator of the overall economic condition in the US. The ISM Services New Orders Index represents business sentiment regarding future market conditions. A result above 50 is positive (or bullish) for the USD.

Read more.

Inflation FAQs

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.