U.S. ISM manufacturing index likely to have dropped in July

The U.S. ISM manufacturing survey index is likely to have dropped in July. According to a Wells Fargo research report, the index is expected to have fallen to 56.1. In June, the ISM survey index had jumped 2.9 points to 57.8, the highest reading since August 2014. The forward-looking new orders component also rose sharply in June to 63.5 from May’s 59.5.

While the optimism amongst the manufacturing sector was encouraging, such a robust trend is unlikely to continue for a few reasons. Firstly, there was a sharp rise in business investment in the first quarter that downshifted in the second quarter. With just modes rebound in global demand, business investment is unlikely to accelerate much in the second half of the year, stated Wells Fargo.

Secondly, the sharp rise in optimism coincided with expectations for a large corporate tax cut. While some tax cuts are expected to take place, they are unlikely to be large.

“Looking ahead to July’s reading, we expect the ISM manufacturing reading pulled back to 56.1 for the month”, added Wells Fargo.

At 22:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -20.2258. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest