• ISM manufacturing PMI misses forecast

• Dollar responds indecisively, stocks extend slide

• Probability of 50bps Fed rate cut in September increase

The ISM manufacturing PMI increased to 47.2 from 46.8 but missed expectations of a rise to 47.5. with the details of the report providing a mixed picture. Prices paid rose to 54.0 from 52.9, but the closely watched new orders subindex declined to 44.6 from 47.6, which is the lowest since May 2023. The employment index inched up, but not enough to exit contractionary territory.

The dollar traded in an indecisive mode at the time of the release, gaining some ground as soon as the numbers were out, but giving back those gains in the next couple of minutes. That said, Wall Street indices, which were already trading in the red, accelerated their decline, perhaps as the release may have rekindled some concerns with regards to the performance of the US economy.

Investors have added some basis points worth of cuts to their implied path, with the probability of a 50bps reduction at the upcoming gathering rising to 37% from 30% earlier in the day. The increasing bets for the Fed to begin this easing cycle with a bold move are also evident by the decline in Treasury yields.