The sell-off in global equities helped to drive the dollar higher against all of the major currencies this morning and the momentum in the greenback was further fueled by the much stronger than expected Chicago PMI report. Manufacturing activity in the Chicago region expanded for the third month in a row with the index rising from 56.1 to 60.0, the highest level since January 2006. The details of the Chicago PMI report reveals overall strength. Aside from a small contraction in supplier deliveries, every single one of the other underlying components increased in the month of December. We were particularly encouraged by the rise in production, new orders and employment. For the first time since November 2007, manufacturers in the Chicago region added jobs, which fits into the overall improvement that we have seen in U.S. data over the past few weeks.
The combination of the strong Chicago PMI and Philly Fed reports suggest that manufacturing conditions have improved nationally. The ISM manufacturing index is due for release next week and based upon the latest numbers, we expect a dollar positive report on the first trading day of 2010. The expansion in the employment component of Chicago PMI also points to smaller job losses in the manufacturing sector which bodes well for next Friday's non-farm payrolls report.
Comments